Industry experts have welcomed the government's commitment to make financial education compulsory in primary schools in England, and to encourage payroll savings more widely, as part of its Financial Inclusion Strategy.

The government shared its new Financial Inclusion Strategy yesterday, revealing plans to deliver regulatory clarity to enable employers to offer workplace savings schemes with confidence, which can help employees start and maintain a savings habit.

The strategy pointed out that research from Nest Insight, funded by the Money and Pensions Service (Maps), the BlackRock Foundation, and JPMorgan Chase, demonstrated that payroll savings can effectively help people to save if behavioural support is put in place, and indicated that there is no adverse effect on pension contributions.

However, it acknowledged that the number of employers across the UK offering these schemes is notably small relative to the scale of potential impact.

Given this, it confirmed that the Financial Conduct Authority (FCA) has published a landmark regulatory statement to help promote uptake, giving employers and savings providers the clarity they need to offer workplace savings as a benefit to their employees.

In addition to this, it also revealed plans to launch a National Coalition of Employers to drive awareness and adoption of workplace savings schemes.

As part of this, Maps, The Investing and Saving Alliance (TISA), and Nest Insight will bring together a national coalition of employers to further encourage the take-up of payroll savings, including the healthcare provider Bupa Care Services, The Co-op Group, and the recycling and recovery company SUEZ UK.

The coalition will be supported and informed by other organisations including the Building Societies Association (BSA) and the Chartered Institute of Payroll Professionals.

Over the coming years, the coalition will seek to encourage more employers to implement payroll savings schemes for their employees and will continue to engage with savings providers who are innovating to achieve greater impact beyond the traditional opt-in models.

However, the report acknowledged that payroll savings only support those working for a participating employer.

Given this, it confirmed that the Department for Work and Pensions (DWP) has provided further funding for the next phase of research by Nest Insight into savings for self-employed people.

While the focus of this research will be on retirement savings, rather than the emergency savings buffer that this strategy seeks to address, Nest Insight will also explore the role that an accessible savings pot could play alongside a retirement saving model for the self-employed.

Nest Insight has welcomed the inclusion of its work in the strategy, with Nest Insight managing director, Will Sandbrook, emphasising that "not only are opt-out payroll savings effective, they are also inclusive".

"A growing body of evidence shows that managing life without the peace of mind and sense of control that a savings buffer gives takes a real toll, which can be harmful to people’s mental health and their relationships," he stated.

"Supporting people to save builds short-term resilience and long-term security. As the Economic Secretary rightly highlights, financial inclusion can be an engine for productivity and economic growth.

“We look forward to supporting the new National Coalition of Employers alongside the Maps and The Investing and Saving Alliance (TISA) to scale up workplace savings and help people build lifelong financial security.”

Adding to this, Independent Governance Group (IGG) head of policy and external affairs, Lou Davey, said that the plan was a "welcome step", which deploys the "very best learnings from the pension industry’s hugely successful auto enrolment, tapping into the inertia of employees".

"Measures that encourage greater saving across society, to boost financial resilience both in the short term and long term can only be a good thing," she continued,

"Developing stronger savings habits has the potential to help close the retirement inequalities that we see, particularly for women and minority groups that are so often falling behind.  

The strategy also outlined the government's plans to drive a "step-change" in the quality and reach of financial education in England.

This also includes a renewed focus in secondary schools on the immediate issues that can affect young people’s finances, ranging from the basics of how to properly budget to wider financial concepts like risk-taking, which can help increase their employability and financial acumen.

The Department for Education will also take forward work to ensure that financial education provision is effectively sequenced with relevant maths skills, such as calculating interest, to ensure young people are equipped with the tools needed for financial decision-making.

This news was welcomed by industry experts, with Tisa CEO, Carol Knight, emphasising that "access to the basics of financial services is vital for us all".

"It is also a particular delight to see the moves to incorporate financial education into the national primary curriculum," she stated.

"Financial education is the bedrock on which better consumer outcomes can be built.

"We further welcome the measures to make it easier for employers to support workers by diverting some of the earnings into savings, reducing the risk of it being swept away in the pressures of everyday budgeting."

This was echoed by My Pension Expert policy director, Lily Megson-Harvey, who said: “The announcement that financial education will include topics such as budgeting, debt, interest, mortgages, and pensions is a welcome step forward.

"However, this must be the start, not the finish. Opportunities to understand how pensions work at midlife, as well as in younger years, mean more people can embrace retirement with confidence, sooner".

“Equipping individuals with the tools to plan for later life will not only improve personal outcomes but also strengthen financial resilience across society."

Davey also suggested that the combination of payroll savings with the measures to improve financial literacy in primary schools means that "we are taking positive steps to building a savings culture that can help people get ahead of some of the biggest challenges that they face, both with having access to short-term savings, as well as growing a healthy retirement pot for their future".  

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