National financial advice will cut down on debt

Research from the Resolution Foundation has shown that the government’s plans for a national financial advice service will cut down on debt for low income earners. According to the research if just 10 per cent of low income earners act on the generic financial advice, some £2.2 billion will be shaved from unsecured debts, while credit card debt would fall by two thirds from £2.5 billion to £830 million. There would be increased take up of life insurance, with premiums increasing by £225 million and pensions contributions would rise by £560 million. New contributions to medium term savings plans are likely to increase by £1.5 billion.

The financial services industry would also benefit from a more sustainable financial services market. The Resolution Foundation’s research suggests that the financial services industry should therefore support the government’s proposals. Last year, the Foundation showed that there was a financial advice gap for 15 million low income earners in the UK. The proposal for generic advice followed this finding.

Clive Cowdery, Chairman of the Resolution Foundation, said: ‘Greater access to financial advice links a sustainable financial services market with the delivery of public policy goals. This creates a win-win situation for the Government and the financial services industry. The industry will want to energetically get behind the work of the Thoresen Review.’

Otto Thoresen, Head of the Thoresen Review of Generic Financial Advice said:’Generic financial advice is an important issue for all – financial services companies, Government and most importantly consumers. My review will create a blueprint for how a national approach to generic advice can be delivered, and I encourage all stakeholders to contribute fully to this debate. I welcome the work that the Resolution Foundation has done in this area and the contribution it has added to this debate.’