Media Release

Report reveals half a million households losing money due to ‘low financial capability’

A new Social Market Foundation (SMF) report, Fixing Family Finances, examines the problem of financial capability in Great Britain at a household level and assesses whether social and family ties can be used to reduce the impact of individuals’ low financial capability.

What is financial capability?

Financial capability can be summarised as the ability an individual has to collect, collate and assess the information needed to make an informed decision when purchasing a good or service or making choices about their future financial plans.

The research, supported by Santander, shows that while most individuals (95%) live in ‘mixed capability households – where people with low financial capability can rely on partners with higher capability to help when making financial decisions – there are more than half a million households in Britain where everyone has low financial capability.

The report finds that these households are more likely to delay or make poor financial decisions over borrowing and investment, and things like choice of utility provider. As a result they are often paying over the odds for household services and missing out on the best deals.

Fixing Family Finances argues that the financial capability of these households should be of particular concern to policymakers as they are almost solely found towards the bottom of the income distribution, with the majority of these households in receipt of out of work benefits.

The impacts of low financial capability can clearly be seen in individual and family outcomes, with previous research showing:

  • 2.6 million people suffer from severe debt and one in six people are over-indebted;
  • Consumers are losing out on £4.3 billion a year by keeping savings in accounts with very low rates of interest; and,
  • Families lose out by around £400 a year if they do not switch energy supplier, current account and mobile tariff. Across Britain this suggests billions of pounds of disposable income lost each year from a lack of engagement.

Other key findings from the research include:

  • One in every eight people in Great Britain has low financial capability;
  • Nearly a third of people have low financial capability in terms of planning their future finances;
  • One in five people score poorly on being able to make ends meet; and,
  • One in eight people would not be able to last more than a week if they lost their main source of income.
  • Over seven in ten (71.2%) individuals with relatively low capability live with someone with a higher level of capability, suggesting that the role of social networks in mitigating the impacts of low financial capability could be strong.

The report recommends a number of schemes which could boost financial skills and confidence among Britain’s low capability households and improve competition and growth:

  • Better deals on benefits: Benefit claimants should be provided a free switching service to help them make the most of their money across the range of utilities and financial service products they use. The Government could work with existing aggregator / switching sites to provide this service at relatively low cost.
  • Super Switch: The government should develop a collective switching initiative. This would be open to all, but particularly targeted at low-income households (for instance by offering to it to new benefit claimants). It would bring together a large number of willing switchers and, in turn, a bulk discounted tariff could be negotiated with a range of providers.
  • Active Consumer Week: Government and regulators should co-ordinate to rebrand and improve the existing ‘National Consumer Week’. This should build on the government’s recent publication, A better deal, creating a week which looks across the whole range of consumer engagement opportunities including switching and protection. The government should work with experts in behavioural science to develop a strategy for making the most impact with ACW. This should look to explore ideas for making it more of a social norm to discuss finances during this week and also communicate the potential benefits of engagement.
  • Changing risk warnings: To prompt discussions with others with potentially higher capability, the Financial Conduct Authority should change financial risk warnings to highlight the benefits of discussing decisions with others. For example, stating that ‘…your capital may be at risk; and many people find that it’s useful to chat to someone about a big decision like this.’

Matthew Oakley, senior researcher and research author, commented:

“This report shows that many of us rely on friends and family to help make the right financial decisions. However there are over half a million households who are unable to do that and, as a result, are losing out on huge sums of money.

It is not just individuals and families that suffer due to poor financial capability – a lack of informed consumer engagement is stifling competition and lowering innovation, productivity and growth across the economy. The government needs to use initiatives like Active Consumer Week to engage those with low financial capability, help remove social barriers to discussing finances and boost competition.”

Commenting on the research Angela Wakelin, Managing Director, Business Operations & Control at Santander UK plc, said:

“Despite having one of the most developed financial systems in the world, too many people in the UK struggle to navigate the market for financial services due to a lack of financial capability.

I welcome this report from the Social Market Foundation. Santander supports initiatives which empower customers to face financial decision making pressures with confidence, which in turn encourages financial providers to be more competitive and innovative in their propositions. Whilst there will no doubt be challenges made around some elements of the findings, I am confident that the insight which it provides will be a great asset to policymakers from across the political spectrum.”



About the Social Market Foundation

The Social Market Foundation (SMF) is an independent cross-party think-tank. While it accepts support from partners to carry out its work, the SMF retains full editorial independence over its outputs. This research was kindly supported by Santander. For more information visit:


To interview the report’s author, SMF senior researcher Matthew Oakley, or for further details about the research, please contact David Mills via or 020 7222 7060.


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