6th December 2018
• Research examines the behaviours and circumstances that influence financial decision making and well-being
• Report finds 52% of people meeting current financial commitments, but have little provision against financial shocks
• Low levels of financial resilience for unexpected events and retirement identified as concern
The Competition and Consumer Protection Commission (CCPC) has today published details of the first financial well-being study conducted in Ireland. The research examines the behaviours and circumstances that influence financial decision making and well-being, the extent to which Irish people are able to meet all of their current financial needs comfortably and their financial resilience to do so.
Speaking at the launch of the CCPC’s report, Minister of State for Training and Skills, Mr John Halligan TD said, “Identifying financial capability across the population and what influences it provides us with a real world understanding of the challenges facing people in Ireland. Understanding financial well-being is crucial to helping people achieve it and this report is an important step in developing this understanding. Everyone benefits in an environment that develops and supports people’s financial well-being, be they individuals, families, businesses or society.”
Overall, the CCPC’s report finds that people in Ireland are faring well in terms of general financial well-being, with an average score of 64 out of 100. In terms of international comparisons, the overall score for Ireland is lower than Norway (77) but higher than Australia and New Zealand (both 59) and on a par with Canada, where the overall score was 65. The report, which builds on the Financial Regulator’s financial capability report in 2008, finds that most people have the means to cover day to day costs and current commitments. However, financial well-being is also the ability to have financial comfort now and into the future. The report found that a significant number of people have little financial resilience beyond meeting current commitments and that 52% of people are meeting current financial commitments, but have little provision against financial shocks.
Commenting on the findings of the study, Isolde Goggin, Chairperson of the Competition and Consumer Protection Commission said, “This study provides vital insights into financial capability and well-being in Ireland and how it could be further improved. It is encouraging to see that Ireland has an overall score of 64, but there is plenty of scope to improve our financial well-being. The research shows that as a whole, people in Ireland are doing reasonably well in terms of general financial well-being but they have low levels of resilience for the future, including in retirement.”
The study grouped respondents into 4 categories of relative financial well-being:
• 25% of people who were considered to be financially ‘secure’ as both their current financial situation and their provision for the future were strong, with some improvement to be made in planning for retirement.
• 52% of respondents were ‘doing fine now, but with little put by’ and performed well in meeting their current commitments with a positive level of financial comfort, but they had less resilience for the immediate future and for retirement.
• 16% of respondents were ‘just about coping’ and appear to be at risk of falling into financial difficulties with little resilience for the future.
• 7% of respondents were ‘struggling’ and are in financial difficulty now with no reserves to protect themselves now or into the future.
The CCPC’s research found that for many people, financial well-being is improved through two key behaviours: ‘active saving’ and ‘not borrowing for daily expenses’. For the majority of respondents, these two behaviours have the most impact on overall financial well-being. Financial confidence is also important and financial education can help to improve individuals’ financial well-being.
In terms of retirement planning the research makes the strong observation that automatic enrolment in a workplace pension scheme is a decisive factor in increasing a consumer’s levels of resilience for their retirement. Simply having the option of enrolling in a workplace scheme is not sufficient on its own and the report evidences that the overall policy objective of automatic enrolment, if correctly targeted, can be expected to have a positive effect on the resilience for retirement of Irish consumers.
Commenting on the longer term implications of the study, Isolde Goggin, said, “The important question now is what can be done to help improve the financial capability of individuals in all four categories. Our research, unsurprisingly, confirmed that income and employment status are crucially linked to better financial well-being. For many people, information will promote better financial capability over time. However, for some, information is unlikely to provide either help or comfort and we hope that this research will assist those who are tasked with developing supports to help those who are just about coping and in financial difficulty.
The CCPC is committed to playing its part in developing financial capability and well-being through our financial education programmes and information and by strongly advocating for the provision of financial education in schools. This study will be a vital resource as it will allow us to improve and better target the information we give to consumers. Given the context of the many people who continue to recover from the financial challenges arising from the recession, it is my hope that the insights from this research will help individuals and groups from all sectors, government, the financial services industry and the community sector to develop effective ways to build financial well-being for all.”
Notes to Editor
The CCPC commissioned the study from academics based at Consumption Research Norway (SIFO), a research centre at Oslo Metropolitan University, who have been pioneering understanding of financial well-being on a global basis. Face-to-face survey fieldwork was undertaken and managed by Amárach Research. The sample size was 1,500. Valid sample of 1,401 after exclusions. This was a larger sample than in many surveys designed to provide a nationally representative sample size.
The definitions of financial well-being and financial capability employed in the study are:
• Financial well-being is ‘the extent to which someone is able to meet all their current commitments and needs comfortably and has the financial resilience to do so’.
• Financial capability is ‘the behaviours and approaches to financial decision making that influence someone’s financial well-being’.
This current study approach reflects international developments in the study of financial capability, with a broader focus on both capabilities and well-being outcomes, using an approach and questionnaire that was developed in Norway, adapted to the Irish context. The same model has also been adapted and employed in Australia, Canada and New Zealand. In total, the questionnaire contained over 60 questions covering financial well-being outcomes, retirement and the range of behaviours, or capabilities, which inform financial well-being. These were used to create 27 measures of behaviour that covered spending, saving, borrowing, money management and aspects of financial decision making, including product purchase.
The overall score is the average of the financial well-being scores across four segments of the population which each received an average financial well-being score. Those scores are calculated from three sub-measures of financial well-being: meeting current commitments, being financially comfortable and financial resilience for the future.
For more information, download our Financial Capability and Well-being in Ireland in 2018 report (PDF document).
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