The UK – acceptably poor with money?
Britain is one of the few developed countries in the world where it is “okay to say that you don’t understand money”, the head of public policy at a major fund house has said.
Sheila Nicoll of Schroders said the UK has a “completely different culture” from other countries which resulted in a relatively poor understanding of financial products and concepts.
Speaking at the Schroders annual investment dinner this week, Ms Nicoll said: “We will only make progress once it becomes socially unacceptable to say you’re bad with money, as it is in the U.S., where admitting you’re bad with money makes you a social pariah.”
She was commenting after being asked by the Young Money Blog about possible government intervention in investor education following the introduction of the Lifetime Isa next month. She added: “The Lifetime Isa is a mish-mash of two different products – a long-term pension and paying for a deposit on your first home. The government is not doing a great deal on investor education, and I don’t see that changing anytime soon.”
The Lifetime Isa will provide a 25 per cent bonus on deposits of up to £4000 a year, courtesy of the government, for anyone over the age of 18 and under the age of 40. The product is so far only being offered by two investment platforms once it launches on April 6 – Hargreaves Lansdown and the Share Centre – and only Skipton Building Society has confirmed it will launch a cash version of the LISA (but not until June).
The Financial Conduct Authority has insisted that risk warnings must be provided to accompany all sales of the product, explicitly stating that workers who opt out of their workplace pension (which provides contributions from your employer) to save into a LISA for retirement will be worse off. However, Darius McDermott, director of Chelsea Financial Services, highlighted the amount of paperwork that comes with investment sales, much of which is ignored by consumers, at the Schroders dinner.
Ms Nicoll attributed much of this unhelpful administration to E.U. legislation that was unlikely to be halted in the UK, as the process to leave the European Union will only begin after certain major regulations are introduced in the UK early next year. She was particularly critical of so-called “PRIPS” legislation, which will force fund houses to provide a standard document detailing all necessary information about their investments (including charges), describing it as a “disaster”. She said: “Just disclosing stuff is not sufficient, and it’s actually more about communication with investors. How do investors ensure they get what they want? Investors need to understand what they’re being charged for, and recognise that value isn’t just about cost.”