British Public Sleepwalking Into Savings Crisis

Only three in ten British people (31 per cent) know what an ISA is, according to a new MORI survey commissioned by Royal London Insurance.

With the Government urging people to take greater personal responsibility for their financial future to counter the diminishing role of the Welfare State, Royal London's survey reveals the size of the gulf that currently exists between what the Government is promoting and what the public actually understands. Furthermore, public awareness of the ISA is particularly poor among those groups for whom the ISA is most intended to help - low income earners, women and the young.

Key findings:

• When asked to name the new savings product that will replace existing PEPs and TESSAs, only 31 per cent identified the ISA.
• Knowledge of ISAs falls sharply with each socio-economic group, from 50 per cent among A/B socio-economic groups, to a mere 15 per cent to D/E groups (see fig. 1).

Fig 1. Those who could identify the ISA as the new savings product that will replace PEPs and TESSAs.

• Young people also have a poor understanding of ISAs: Only 17 per cent of under 25s knew what an ISA was compared to 40 per cent of 35-44 year olds (see fig 2).

Fig 2. Identification of the ISA by age group

• Only 27 per cent of women knew what an ISA was, compared to 36 per cent of men.
• Of those who specified a name for the new savings account, 14 per cent thought it was called the FSA, five per cent thought it was called the SAS, three per cent thought it was called BSE and two per cent thought it was called MCC.

Royal London has already thrown its weight behind the ISA but believes that the on-going debate between the Government and the financial services industry risks losing sight of the overriding issue - responding to what the public need by the provision of a solution that they understand and will use.

The survey demonstrates the public's need for greater financial education. This autumn, Royal London will use its Home Service network to promote the need for a savings culture through face-to-face advice. Some things are too important to do over the telephone.

Says Mike Yardley, Chief Executive of Royal London Insurance: "Much recent debate on the ISA has centred around detail on pricing arrangements and concern by the product providers on distribution costs. Preliminary findings from Royal London's study suggests that these debates are not moving in line with public awareness of the proposed product."

"We fully back the principles behind the ISA scheme and believe that the need to get more British people onto the savings ladder has never been more important. However, public awareness of the ISA is poor and particularly among those groups for whom the ISA is most intended to help - the hard-up, women and the young."

"The wide range of opinion currently being offered on ISAs can be seen to betray a degree on confusion. Our study specifically intended to address the basic issues and the revelation of poor levels of public awareness are a real cause of concern. Put simply, if the majority of the British public do not know what the ISA is, fewer still can be expected to actually use it."

Technical details

• The survey was carried out by MORI for Royal London Insurance in September 1998. 2,083 people took part in the survey which is representative of the GB population.
• Royal London is based in Colchester, Essex and was established in 1861. It is one of the largest mutual life companies in the UK and has, according to Money Management's most recent financial strength survey, one of the highest free asset ratios against its competitors.
• Royal London's core business is the transaction of personal life assurance, mortgages, pensions and general insurance through 'home service' distribution throughout the United Kingdom.
• Royal London has funds under management of 1637 billion and employs over 3,500 staff throughout the UK.
• Royal London has 62 Area Offices in the UK and 1500 FPC3 qualified sales staff.