Consumer Financial Education Body in Financial Services Bill receives Royal Assent

NEWS RELEASE

For immediate release: Friday 9 April 2010

CONSUMER FINANCIAL EDUCATION BODY IN FINANCIAL SERVICES BILL RECEIVES ROYAL ASSENT

The Resolution Foundation is delighted that the Financial Services Bill received Royal Assent during the wash-up process. The Bill will establish the Consumer Financial Education Body which will be responsible for running Money Made Clear – the new financial advice service aimed at low earners.

The Foundation has been championing the ‘advice gap’ that low earners face and is delighted that Money Made Clear was rolled out nationally in March. Crucially it now has an independent body to run it, giving it a strong footing in its first year of delivery. Now, more than ever, low earners are in need of help before they miss their first payment.

• The new body will help increase the profile of Money Made Clear and the wider financial capability agenda. The Foundation stated in its early research that Money Made Clear should sit independently of the FSA within its own ‘unit’ so that it is able to focus on meeting the needs of the consumer.
• The new body will also be able to raise funding via a variety of streams – a levy on consumer credit firms, government funding and dormant bank accounts. The use of the existing FSA levy and the OFT’s licensing regime will mean no extra administrative burden for financial services.

In 2005 the Foundation recommended that a generic financial advice service was needed to meet the needs of the UK’s 14 million low earners who fall into an advice gap.2 This work led to HM Treasury’s Thoresen Review which recommended in March 2008 that a Money Guidance service be set up. The Treasury then announced the pathfinders of ‘MoneyMadeClear’ which were launched in March 2009.3

The Foundation’s research has shown that greater access to financial advice could leave young low earners £60,000 better off by the time they reach 60, deliver welfare savings of £100 million within 10 years and provide long term benefits to the financial services industry.

Sophia Parker, Acting Director of the Resolution Foundation, said:

“The economic context has accelerated the need for free and impartial advice to help people avoid financial crisis. We are delighted to welcome the Consumer Financial Education Body on to the statute book as it will give the national roll-out of Money Made Clear the strong and independent start it needs.”

She added:

“This service will help millions of low earners stay in control of their money and maintain their financial health.”

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For further information please contact Cara Brown on 020 3372 2954 / 07957 536758 or cara.brown@resolutionfoundation.org or Mark Hanson on 07973 697947

All the Foundation’s research, reports, briefings, seminar notes are also available on our website.

Notes to editor:

1. At its broadest, we define the group as including all those with below-median income (from all sources) who are not dependent on state support. For the purposes of analysis, precise definitions depend on the data source being used: details are provided in Appendix 3. However, as a proxy, we consider the low earning group to comprise those households in income deciles 3, 4 and 5: that is, with equivalised[1] gross annual income between £13,500 and £25,800. Around 7.2 million households fall into this category in the UK, accounting for around 14.0 million adults.^[1] We define two other income groups in relation to low earners: households with above-median equivalised incomes (income deciles 6-10) are considered higher earners, while those with below £13,500 income (deciles 1 and 2) are considered benefit-dependent.
2. See Closing the advice gap: providing financial advice to people on low incomes; A national dividend: The economic impact of financial advice; and The advice gain: The impact of generic financial advice on the financial services industry all of which can be downloaded from the Foundation’s website.
3. The Financial Services Bill received Royal Assent on Thursday 8 April http://services.parliament.uk/bills/2009-10/financialservices.html
4. The Money Made Clear Service is currently at pathfinder stage and is being jointly run by the Government and the Financial Services Authority (FSA) backed by £12 million. They offer help with money issues online, over the phone and face-to-face across the North West and North East of England. The pathfinder builds on the FSA’s Moneymadeclear website and helpline, which people can access wherever they are in the UK. Today’s announcement also means the service will continue in the North-East and North-West. Online http://www.moneymadeclear.fsa.gov.uk/ or by calling 0300 500 5000, Mon-Fri 8am-8pm, Sat 10am-6pm, Sun 11am-5pm. The face-to-face service will only be piloted in the North-East and North-West.