Financial products too complex for most people in the UK, survey reveals

News - Banking

Written by Ray Clancy

Monday, 22 November 2010 11:28

Almost six out of ten people in the UK are worried about their finances and a staggering 87% say they would be more likely to save if financial products were more flexible and made easier to understand.

Some 43% of people worry about money ‘more often than not’, 16% worry about it ‘all the time’ and only 3% say that they never worry about money, a dramatic drop from 12% in 2009, according to the annual Financial Planning Survey 2010 commissioned by the Institute of Financial Planning (IFP) in association with NS&I (National Savings and Investments).

When asking people how confident they were about saving or investing money in a variety of ways, from a building society savings account to investing in global equities, the emerging insight is the great lack of confidence in saving and investing in nearly every product or institution.

Only using a bank savings account for amounts up to £50,000 managed to secure confidence (43%) and using a building society account for savings up to £50,000 managed 49%. Only 10% were confident about investing in global equities, with UK equities faring only slightly better at 14%.

It also found that people are regularly failing to plan ahead. Compared to previous years’ findings in 2008 and 2009, fewer people this year have taken the time to identify their financial priorities and put plans in place to achieve them. Just 14% have financial goals they are working towards, in contrast with the 26% of respondents who answered positively in 2008.

And over a quarter, 27%, of all respondents say they never set themselves a clear budget to follow. Younger people are particularly unlikely to plan for their future with 88% of 25 to 34 year olds saying they do not have a financial plan which they review regularly with a financial adviser or planner. Meanwhile a third, 33%, of people overall say they hope to improve their financial situation by winning the lottery.

‘This survey has indicated yet again that consumers are worried about their financial position, yet they are not taking appropriate financial planning steps to improve it. They are confused by the range of products available and lack confidence in them too,’ said Nick Cann, chief executive officer of IFP.

‘The Government has indicated with changes to the state pension age, and the reduction in tax relief for some on pension savings that individuals will need to take more personal responsibility when planning their finances if they are to accumulate the funds necessary to provide the standard of living that they aspire to in retirement. Clearly, the need for sound financial planning has never been greater,’ he added.

According to John Prout, sales director of NS&I it is important that people make an honest appraisal of their financial situation on a regular basis, through assessing three key things; the value of their debt and/or assets, the interest rate they are paying or earning on these and whether they could manage financially if their income was to reduce or their outgoings to increase.

‘By reviewing and making plans to manage the unexpected it should to be much more manageable should they ever experience a squeeze on their finances. For some people seeking independent financial advice may be a key part of this process,’ he said.

The survey also questioned respondents about the usefulness of different sources of financial advice. Independent financial advisers had the second highest score, 7.4 out of 10, while bank representatives, the most used source of advice at 48% of respondents, had the second lowest score, 6.2.

And while 34% agreed that a financial adviser would ‘research the entire market and recommend the most appropriate product’ and 30% felt that they would ‘help to unravel the complexity of the financial world’, just over a quarter, 26%, could think of no benefit at all to using one.

But there are signs that more people are taking professional advice on a regular basis however. In 2009, only 7% of respondents regularly spoke to a financial adviser, while that figure has now gone up by 4%, to 11%.