At Starling, we believe it’s important to talk about money. When we heard that the Money and Pensions Service (MaPS) had launched a UK Financial Wellbeing strategy, promoting a national conversation about money, we were naturally interested.

We asked business journalist Abigail Townsend to find out more from their chief executive Caroline Siarkiewicz.

The following article reproduces the interview and does not necessarily represent the views of Starling.

Around 11.5 million British adults have less than £100 in savings, while nine million often use credit cards and payday loans to pay for food and energy bills. These shocking figures came from the Money and Pensions Service, a government body set up to help people access financial information, including on pensions and debt.

The MaPS’ research also revealed that 22m people feel they do not know enough to plan for their retirement, while more than 5m children are not getting a meaningful financial education, leaving them less able to manage money later in life.

No wonder that MaPS believes poor financial wellbeing is holding the UK back.

In response, it has launched an ambitious, decade-long plan to transform the country’s financial health and help people take control of their finances. The UK Strategy for Financial Wellbeing 2020-2030 has five priorities:

  • Encourage 2m more working-age people to save regularly
  • Stop households using credit to pay for everyday essentials
  • Better financial education for children and young people
  • Ensure access to better debt advice
  • Help 5m more people understand and plan for their financial future

Achieving that will not be without its difficulties. Culturally, we have shifted from being a nation that saves for big ticket items to one that pays for them on credit, while savings decline.

Meanwhile, interest rates are at a low of 0.25%, and have been under 1% since 2009, when central banks slashed the cost of borrowing in response to the financial crisis. It means there is little financial incentive to save – while debt looks cheap.

The person heading up this move to transform our financial wellbeing is Caroline Siarkiewicz. Appointed MaPS chief executive a week after the framework was published in January this year, following an eight-month stint as interim head, she has spent a career in personal finance, joining MaPS from the Money Advice Service where she head of UK debt advice. We asked Caroline about the task ahead of her.

Why is financial wellbeing so important?

It underpins health and happiness. It’s knowing you can pay the bills, can deal with the unexpected, and are on track for a healthy financial future. However, many people across the UK are demonstrating signs of poor financial wellbeing. Many struggle to pay for unexpected expenses, get out of debt and save enough for a comfortable retirement.

Our new strategy sets out to improve millions of lives. Improving financial wellbeing has knock-on effects for people’s mental and physical health, and relationships. And it will create better workplace productivity and boost the economy with more people investing for retirement.

How have we got to this point?

We’ve seen a steady stream of loan products being marketed in a way that makes borrowing seem simple and easy. However, people aren’t always aware when using credit what the terms are and how much they will end up paying in the future. We want to see more people building a savings habit and cash reserves to help with short-term emergencies, as well as more actively planning for later life.

How will the UK Strategy for Financial Wellbeing work in practice?

Key activities we’re looking at will include increasing the availability of affordable credit for people who need to borrow, more products letting people save through payroll, and more free debt advice for people in crisis.

But transforming financial wellbeing is a major task that we cannot achieve alone. We will act as a catalyst to create a financial wellbeing movement, connecting organisations – including corporate firms, charities and other bodies – which can make a difference.

We have set up Challenge Groups to consider our key goals and propose tangible solutions that can make a difference, whether that’s increasing the availability of affordable credit products or scaling up workplace payroll saving schemes to get more people saving by default. We will be working with the partner organisations on new products to make saving easier.

What about interest rates – don’t they need to be higher?

To encourage more people to save, several things need to happen. Support and guidance must continue, but more broadly, a cultural change is needed. A more widespread habit of saving would be transformative for the nation’s financial wellbeing and we need to see a cultural shift to support its development. The amount being saved is almost secondary; forming the habit is the breakthrough moment.

How confident are you that the framework will succeed?

This cultural shift will require systems to change so that it is easier to put money into savings, no matter how small the amount, and for people to think twice about taking it out. We also want to change the national conversation, to see saving as valuable and attractive. There needs to be a focus on banked savings rather than money-saving tips, as money saved tends to be spent on other items.

The ultimate goal is everyone making the most of their money and pensions, but there needs to be lots of steps along the way. The first phase is under way: getting more people talking about financial wellbeing and getting more organisations playing their part in improving it. MaPS alone cannot achieve the major shift which is needed, but I am excited about the role we’re going to play in bringing everyone together and ensuring all this passion is channelled into something transformative.

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