Information: For immediate release Wednesday 14 April 1999

UK FINANCIAL KNOWLEDGE INDEX FALLS TO ITS LOWEST LEVEL

People are more confused than ever when it comes to basic financial knowledge. The monthly FACETS’ study*, which tracks the public’s understanding of personal finance, showed in March a clear worsening in the levels of comprehension of even the most basic financial facts.

The FACETS ‘Knowledge’ Index, based on the number of correct answers given to the survey’s fixed list of basic financial questions, in March fell for the fifth month in succession to a new low of 96.5 (100 at inception in October 1997). The ‘Ignorance’ Index, which tracks the level of ‘don’t know’ responses, rose to its highest level since the indices were launched 17 months ago.

A number of key areas within the FACETS study, which tests the public’s knowledge in all basic areas of personal finance, including savings, pensions, endowments, mortgages and collective investments, contributed to the adverse movements of the indices:

• Highest level of don’t knows (36% of the sample) on the question of how many current accounts an individual may have
• Record level of don’t knows (45%) on whether pension income is taxable
• Lowest level of correct answers on the definition of unit trusts as a spread of investments
• Peak 60% of the sample still didn’t know how may PEPs you could have per year

Anne McMeehan, Director of Communications at AUTIF, said:

"The trend highlighted by our FACETS index is a worrying one. Whether it is the result of a more honest public willing to admit they don’t know the answers, a drop in their confidence, or indeed a greater awareness of the gaps in their knowledge, it is a trend which we must reverse."

She continued:

"The consumer is also faced at the moment with an influx of information about the new ISAs, potentially confusing and daunting. It is more important than ever that the opportunity is seized to help consumers as much as possible with simple and clear information.’’

For further information please contact:

Philip Warland, Director General, AUTIF, 0171 831 0898
Anne McMeehan, Director of Communications, AUTIF, 0171 831 0898
Clare Arber, PR Manager, AUTIF, 0171 831 0898
Emma Weiss, Communications Manager, AUTIF, 0171 831 0898

Notes to Editors:

1. *FACETS (Financial Awareness and Consumer Education Tracking Study) is sponsored by the Association of Unit Trusts and Investment Funds (AUTIF) and is a cross-population study 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; and is then analysed 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 achievement of a positive trend over time in the level of understanding by the population at large.