Friday 8 January 1999

PUBLIC IGNORANCE OF PEPS AND TESSAS PROVIDES CHALLENGE FOR ISA LAUNCH

• 56% of the population are unaware of the most basic PEP rules and 47% are unaware of the most basic TESSA rules, according to AUTIF’s Financial Awareness & Consumer Education Tracking Study (FACETS)

The first full year’s data from the Association of Unit Trusts and Investment Funds’ ongoing FACETS study, the monthly population survey which tracks basic financial awareness, shows that of all the basic financial products, the public are most in the dark when it comes to PEPs and TESSAs.

Over 8,000 people were questioned between January and December 1998 on their basic understanding of the key areas of personal finance including savings accounts, pensions, endowments, mortgages and collective investments. In the section which relates to how many PEPs and TESSAs an individual is allowed to hold in any one year, well over half of the 8,242 sample (56%) said they didn’t know whether you could only hold one PEP per year. In addition, 47% didn’t know that you could only have one TESSA account per every five years. In other areas of the survey, the average level of ignorance, where ‘don’t know’ was the given answer, was only 40%.

Philip Warland, AUTIF Director General, said:

‘The financial services industry and the Government face a severe challenge in the year ahead. If the population at large found PEPs and TESSAs to be the most complicated and difficult area of basic personal finance to understand, then in the short term the introduction of ISAs will intensify the problem significantly.'

He continued:

‘We have the benefit of hindsight with the experience of PEPs and TESSAs, and must use that to secure a better public awareness and understanding of ISAs, a more complicated product. Otherwise the new investment vehicle will simply not succeed and will suffer an increase in invalid accounts.’

For further comment please contact:

Philip Warland, Director General, AUTIF, 0171 831 0898
Clare Arber, PR Manager, AUTIF, 0171 831 0898

Notes to Editors:

1. 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
2. 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.
3. 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.
4. 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.
5. 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.