The Financial Conduct Authority (FCA) has found 7.4 million people unsuccessfully attempted to contact one or more of their financial services providers in the 12 months before May 2022, with the most vulnerable in society most likely to struggle with this.
The figure comes from the FCA’s latest Financial Lives survey with over 19,000 respondents.
Less than half of UK adults, or 21.9 million people, had confidence in the UK financial services industry and just 36% agreed that most financial firms are honest and transparent in the way they treat them.
Although a more positive picture emerged when people were asked to rate their own provider rather than the sector in general.
The financial lives survey also reported that adults with one or more characteristics of vulnerability were more likely to report that customer support services did not help them at all.
Some 20% of those with low financial resilience and 20% of those with low capability reported that provider communications did not help at all, compared with 12% of those with no characteristics of vulnerability.
The FCA’s findings come only days away from the introduction of the Consumer Duty. The Duty will require firms to act to deliver good outcomes for consumers and, in turn, help to improve trust and confidence in the financial services sector.
Under the Duty, firms will have to:
- Provide helpful and responsive customer service – for example, it should be as easy to complain about or switch and cancel products or services as it was to buy them;
- Equip their customers to make good decisions through communications people can understand, provided at the right time;
- Provide products and services that meet consumers’ needs and work as expected; and
- Explain and justify their pricing decisions. This includes being able to demonstrate that rates offer fair value.
Sheldon Mills, executive director for consumers and competition at the FCA, said: “Times like this show why it’s important people get the support they need as more people are likely turning to their financial services providers for help. Our Consumer Duty will guide our ongoing work to improve the way firms provide customer support – getting through to your provider is the starting point for receiving help, so we will be working with them to improve in this area.”
Jenny Davidson, commercial proposition director at Quilter, added: “Vulnerability can be a deeply personal issue. Customers are unlikely to shout about it or may be unwilling to discuss it, so a crucial challenge for all companies is to identify customers on this spectrum of risk.
“All employees of financial services firms must have the skills and capability to recognise and deal with customers who display signs of vulnerability, and the FCA has previously provided guidance on embedding fair treatment of vulnerable customers across businesses. Financial services firms can play a key role in helping those with additional requirements manage their finances.
“Not all customers with characteristics of vulnerability will be vulnerable. There are incidents of transient vulnerable people who, because of specific circumstances at a certain time, may not be able to make a complex decision. Navigating financial choices whilst displaying a characteristic of vulnerability may at times feel like an unsurmountable challenge, and it is vital that firms do all they can to help people easily navigate their money choices.”
The FCA survey also found savers and retirees remain resilient and are making sensible long-term decisions despite the pressure on household budgets caused by surging inflation.
Just 6% of pension savers (1.5 million people) reduced contributions or abandoned retirement saving altogether in the six months to January 2023 as a result of the rising cost of living.
Among those aged 55 or over with a pension in accumulation in May 2022, just 6% (300,000 people) had cashed in some or all of their retirement pot in the six months to January 2023 to cover day-to-day expenses as a result of spiralling living costs.
More worryingly, almost a third (30%) of pension savers couldn’t say how much they had in pension savings in total – reinforcing the need for pensions dashboards.
Pension scams remain an ever-present threat, although the cold-calling ban has seen the number of people reporting receiving an unsolicited approach cut in half since it was introduced in 2019.
Tom Selby, AJ Bell’s head of retirement policy, said: “Given the financial pressures millions of households were facing in 2022, one of the major concerns was this would hit the government’s flagship automatic enrolment reforms. The positive news is that in the six months to January 2023, just 6% of pension savers had either reduced contributions or abandoned retirement saving altogether.
“Although in an ideal world everyone would stay in their workplace pension scheme, with inflation running as high at it has been, that simply isn’t realistic. Indeed, given the desperate circumstances many will have been facing, cutting back on retirement saving may have been the only option.
“Another major fear was that rising living costs would spur people to raid their hard-earned retirement pots en masse. Again, the data suggests that, by-and-large, savers are acting responsibly and staying focused on their long-term goals. For those saving for retirement today – and particularly younger generations – uncertainty over what the state pension will look like or when you will get it means it is crucial you take responsibility and save for yourself, ideally above auto-enrolment minimum levels. Failure to do this will leave you a hostage to fortune – and the whims of politicians.
“The FCA’s survey also casts a light into the levels of knowledge and engagement among UK adults – and the result aren’t pretty. This is perhaps unsurprising given over £26bn ($34bn, €30bn) of pension money is considered ‘lost’, a number that has increased substantially in recent years in part as a result of the success of auto-enrolment. Pensions dashboards, which will eventually allow people to see all their pensions in one place, online, were supposed to be a big part of the answer to this problem.”
The financial lives survey also found nearly half (46%) of adult men now invest compared with 38% in 2020.
Some 4.3 million people aged 18 to 24 owned an investment in May 2022, with nearly half of them having started investing in the two years prior.
More new young investors (16%) have a moderate to high risk tolerance when it comes to investing, with only 5% of older investors falling into the same category.
There was a threefold increase in cryptocurrency ownership from 2% of the population in 2020 to 5.8% in May 2022.
People continue to hold substantial amounts in cash, with 79% of those with £10,000 to £20,000 in savings holding most or all of it in cash.
Even the wealthiest have high cash levels: 40% of those with £100,000 to £250,000 in savings hold most or all of it in cash.
Laura Suter, head of personal finance at AJ Bell, added: “Britain has undergone an investing boom, with two million more people investing in 2022 compared to 2020. Young men and cryptocurrency have put the rockets behind this surge in investing, but there’s been an increase across the board as pandemic savings coupled with high inflation have led more people to start investing.
“The figures show that almost half of adult men (46%) now invest, up from 38% in 2020. On top of this the biggest increase in investing has been with those aged 25 to 34. As of May 2022, 4.3 million people aged 18 to 34 owned an investment, with almost half of them having started investing in the two years to May 2022.
“The surge in the number of men investing means the gender investment gap has widened during this time – with men being more than one and a half times more likely to invest than women. A big chunk of these new investors are risk-hungry, emotional men who are investing outside of tax wrappers and using social media for their research – meaning there is a potential for a shock coming down the line for some of this new wave of investors. Two-fifths of new investors are investing directly in shares outside of an ISA wrapper, presumably driven by the rise in trading apps that boomed during the pandemic.
“While many may enjoy direct investing, rather than investing via funds, it’s unlikely to be the ideal starting point for many inexperienced investors. On top of this 16% of new young investors said they had a moderate to high risk tolerance when it comes to investing, compared to 5% of older new investors. Taking higher risk with assets is fine if you’re not investing all your money and you can afford to ride out the highs and lows of volatile, riskier markets, but many signs point to people investing outside of their risk tolerances.”