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Monday, January 15, 2007

Tackling financial illiteracy

Ed Balls, former Financial Times journalist, is tipped to be appointed Chancellor when Gordon Brown succeeds Tony Blair as Prime Minister - - that is the game plan anyway!

Given that almost every adult has some exposure to the tax system, it seems bizarre that one can pass through the educational system and not have a clue about its basic essentials.

Payroll departments have the unenviable task of answering questions: why was my pay cut this week ? and similar questions.

The UK has today proposed a plan to address financial illiteracy and it's likely to be adopted in Ireland in coming years.

Every adult is to be offered free basic advice about financial products in a nationwide scheme to be set up within five years.

Ministers have appointed Otto Thoresen, chief executive of Aegon UK, British arm of the Dutch insurer, to lead a task force to design it by the year's end.

The service will provide advice about transactions from mortgages and pensions to investing in the UK government's Child Trust Fund, or baby bond.

The Treasury reckons inability of millions of adults to get to grips with basic financial information hampers economic efficiency and entrenches poverty.

Today Ed Balls, the Economic Secretary to the Treasury, launched the Government's long-term approach to financial capability, with James Purnell, Pensions Reform Minister, at the Anne Taylor Children's Centre in Hackney.

Speaking at the Centre, Ed Balls announced that a new taskforce has been asked to research and design a national generic financial advice service - ensuring that every person, including those on the lowest incomes, can get quick, easy and simple access to good quality financial advice. A cross-departmental Ministerial group will co-ordinate the Government's work plan to enhance financial capability ensure Government programmes link effectively to the new advice service.
The Government believes that everyone in society has the right to get advice they can understand and trust on the financial options available to them, from getting out of debt through to choosing a home and saving for a pension.

Otto Thoresen will report to Ministers by the end of the year. The Government will publish an action plan by the end of 2007 setting out how financial capability will be integrated into existing services, particularly for those most vulnerable to the consequences of poor financial skills and taking forward plans for a national approach to generic financial advice.

The Financial Times says that the scheme is likely to comprise a national helpline and website and network of new and existing local advice centres. It will link to independent financial advisers or product providers.

The service will cost about £50m a year, to be shared by the taxpayer and the financial services industry. The service will be open to all. Efforts will be made to encourage low-income groups to use it. It will be in place by 2012, in time for introduction of Personal Accounts: a pension savings scheme into which up to 10m employees will be enrolled.

Today's announcement coincides with the Office for National Statistics publication of its personal inflation calculator to let people work out their personal inflation rate. The new ONS website will allow users to see how their spending patterns deviate from the national average.

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