For immediate release Thursday 12 March 1998
AUTIF'S RESEARCH REVEALS POOR CONSUMER UNDERSTANDING OF 'ENDOWMENT'
PRODUCTS
- AUTIF’s Financial Awareness & Consumer Education Tracking Study
(FACETS) reveals that only 39% of a sample of 4,326 people were
aware of a link between the return on an endowment policy and
the performance of the stockmarket.
- Of the total sample, 41% were mortgage owners. 23% of this group
of people failed to recognise any link between the stockmarket
and the return on an endowment policy and 21% ‘did not know’ if
there was a link. Therefore, there is an understanding ‘gap’ amongst
44% of this group.
The Association of Unit Trusts and Investment Funds’ ongoing FACETS
study, started in August last year, is being conducted each month
across a representative sample of the British population in order
to ascertain the level of consumer knowledge and understanding of
basic financial matters and products. The particular question asked
in this part of the study seeks to identify the level of appreciation
amongst consumers as to whether the ability to pay off a mortgage
at the end of the term using an endowment policy is dependent on
the performance of the stockmarket. Last month’s focus was on people’s
poor understanding of PEPs.
Men were found to be better informed than women, with 62% of men
with a mortgage managing to give a correct response, whilst only
46% of women answered correctly. 50% of those in the 25 to 34 age
bracket of the total sample responded correctly, but those in the
older age groups were less well-informed, with only 41% of those
in the 55 to 64 age group answering correctly.
Anne McMeehan, Director of Communications at AUTIF said:
"This level of ignorance about endowment policies is but
a specific example of a general ignorance of financial products.
Consumers must be made aware of the nature of the products they
have already bought and they have to be in a position to understand
better what they may be committing themselves to in the future."
She continued:
"Peter Nowell of the Faculty and Institute of Actuaries
has recently made the point that,
"in today’s economic environment, which is characterised
by low inflation and low interest rates, policyholders must
understand that pay-outs on life contracts are likely to be
lower than in the past."
Contrast this view with the general lack of understanding shown
by a significant proportion of the population and you have a potentially
dangerous cocktail. It calls for much greater effort by Government,
regulators and the financial services industry to improve levels
of awareness and understanding of personal finance matters amongst
consumers."
For further comment please contact:
Philip Warland, Director General, AUTIF, 0171 831
0898
Anne McMeehan, Director of Communications, AUTIF, 0171 831 0898
Emma Weiss, PR Manager, AUTIF, 0171 831 0898
Notes to editors:
- AUTIF’s Director of Training and Education, Victoria Nye, who
represents the Association on the Personal Finance Education Group
and the DSS - Pensions Education Working Group, can provide detailed
information on AUTIF’s current activities in the area of education.
- The cross-population study is based on independent data collected
by RSL, one of the largest operations working in this area and
a leading exponent of computer assisted personal interviewing.
This is then compiled into a practical format for subsequent interrogation
across a wide range of socio-demographic splits using MarketMinder.
For further details contact Mike Hare - MarketMinder - Tel: 01778
345588
- Each month a sample of 1000 people is filtered to isolate those
responsible for making financial decisions. It is rigorously selected
to reflect the balance of the adult population by sex, age, socio-economic
group and geographical location. People are interviewed on a face
to face basis to ascertain their understanding of basic personal
finance matters that are likely to affect them.
- There are 14 questions asked each month covering a wide range
of personal financial topics. They are the same questions and
will not change unless circumstances specifically demand it, in
which case they will be replaced by a question of similar weight
and where a lack of understanding or appreciation will have similar
implications for people's financial security. As this is an ongoing
survey these are 'live' questions and therefore their precise
nature and phraseology is not open to general disclosure, although
members of the press may see them on request for their own appreciation
and strictly not for publication for fear of interfering with
the research.
- The questions are asked to establish a True, False, Don't know
response, thereby establishing a number of measurement tools.
The main AUTIF FACETS index is based on knowledge, i.e. those
questions that are correctly answered. In addition AUTIF is in
a position to measure the level of misunderstanding, i.e. where
the answer given is wrong, the level of ignorance where the answer
is 'don't know' and if the last two elements are combined to form
a composite, the understanding 'gap' can be monitored. Furthermore,
this can be carried through to assess understanding on an individual
question basis and to measure any improvement that can be isolated
to specific segments of the population.
- It is not anticipated that there will be much volatility in
these indices and a three month rolling measurement is being used
so as to ensure the sample has maximum relevance. What is sought
is the translation of a positive trend over time in the level
of understanding by the population at large.
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