Financial Capability and Well-being in Ireland in 2018 - CCPC.ie
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Financial Capability and Well-being in Ireland in 2018
Financial Well-being Financial well-being is defined in the study as ‘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 Financial capability is defined in the study as ‘the behaviours and approaches to financial decision making that influence someone’s financial well-being’.
Table of Contents 1. Chairperson’s Foreword 4 2. Introduction 6 3. Summary of Key Findings 9 4. Findings at a Glance 12 5. Key Findings 14 6. International Comparisons 26 7. Conclusions and Recommendations 27 8. Technical Appendix 31
Foreword
Unquestionably, many people’s
financial circumstances changed
considerably at that time. From
2008, the recession had a significant
impact on financial well-being in
Ireland and for many people, this
impact continues to be felt. We
commissioned this research to gain an
up-to-date assessment of the levels
I am pleased to present this report, of financial capability and financial
‘Financial Capability and Well-being well-being in Ireland and to draw
in Ireland in 2018’, which summarises out the implications for public policy
the findings of large-scale research and the CCPC’s financial education
conducted earlier this year on behalf programmes.
of the Competition and Consumer
Developing a deeper understanding
Protection Commission (CCPC).
of the current level of financial
Our mission is to use our knowledge capability and well-being among
and statutory powers to promote people in Ireland is crucial, not just for
competition and enhance consumer the CCPC in the performance of our
welfare. We have a specific role role, but also for the large number of
under the Competition and Consumer organisations and individuals, involved
Protection Act 2014 to promote the in education, Government, service
interests of consumers by providing provision and social policy. In this area,
information in relation to the costs, understanding the factors behind the
benefits and risks of financial services current levels of financial capability
as well as promoting the development and well-being, is particularly
of financial education and capability. valuable, as this understanding
enables the CCPC, and others, to
This research focuses on both financial develop responses to the needs of
capability, which is the behaviours particular groups.
and approaches to financial decision
making that influence someone’s The CCPC’s role does not differentiate
financial well-being, and well-being between different types of consumers
itself, which is the extent to which and our programmes are targeted
someone is able to meet all their at everyone. However, the research
current commitments and needs has confirmed, not unexpectedly,
comfortably and has the financial that income and employment
resilience to do so. status are crucially linked to better
financial well-being and for some
The previous large-scale study of consumers, information to promote
this kind was commissioned by the better financial capability is unlikely to
Financial Regulator, which measured provide either help or comfort.
levels of financial capability in 2008.
4Foreword
In these instances, more appropriate research in Ireland, particularly
responses lie in public and social policy Professor Elaine Kempson and
supports. Given that the research Christian Poppe of Consumption
quantifies the level of well-being Research Norway (SIFO), to Amárach
across the population, it is hoped that Research for conducting the survey in
this research will assist not only the Ireland and to the CCPC team. I would
CCPC, but many other organisations, also like to personally express my
particularly those who are tasked gratitude to the survey participants
with providing supports to address across Ireland who gave their time
challenges that sections of society to this research and so generously
face in relation to their financial shared details of their financial habits
capability. and attitudes.
The research shows that a large Finally, particularly in the context of
proportion of people could benefit the many people who continue to
from interventions specifically aimed recover from the financial challenges
at growing their levels of financial arising from the recession, it is my
capability over time. While the hope that the insights from this
average score for the general financial research will help individuals and
well-being of Irish people is 64 out of groups from all sectors, Government,
100, the results clearly show that there the financial services industry, and
is an expected variation in financial the community sector, to develop
well-being across different groups. effective ways to build financial well-
Therefore, certain groups may benefit being for all. I would like to take this
most from certain interventions. opportunity to reaffirm the CCPC’s
The results of the study point to commitment to playing our part, by
particular areas of strategic activity helping consumers make informed
for the CCPC – focusing on children decisions through the information we
and young people, the importance provide and continuing to promote the
of active saving and encouraging development of financial education
financial resilience for retirement. and capability in Ireland.
The methodology used in this research Our work in this area will be
mirrors an evolution in research which underpinned by a number of strategic
is being pursued in other countries. priorities for delivery between 2019
This approach is quickly becoming and 2021.
a global benchmark for studies of
financial well-being. It also, very
valuably, creates a benchmark for
Ireland against other countries that
have followed this same methodology.
I would like to express my thanks Isolde Goggin
to all those who contributed to Chairperson
the development of this important
5Introduction
Introduction Financial well-being is ‘the extent to
which someone is able to meet all
This report presents the key insights their current commitments and needs
and findings from ‘Assessing the comfortably and has the financial
Levels of Financial Capability and resilience to do so’.
Financial Well-being in Ireland’,
a study commissioned by the Financial capability is ‘the behaviours
Competition and Consumer Protection and approaches to financial decision
making that influence someone’s
Commission (CCPC) on the financial
financial well-being’.
well-being of people in Ireland1. The
CCPC commissioned the study from
academics based at Consumption
Background to the study
Research Norway (SIFO), a research Irish consumers face multiple
centre at Oslo Metropolitan decisions and conflicting pressures in
University, who have been pioneering managing their money. The decisions
understanding of financial well- consumers make are influenced by
being on a global basis. Face-to-face their financial capability, and the
survey fieldwork was undertaken and impact of those decisions is seen in
managed by Amárach Research2. their financial well-being.
The CCPC has a statutory function to Yet our understanding of how certain
promote the development of financial financial capabilities determine
education and capability. We fulfil this financial well-being, how these
function by providing information to capabilities vary across the Irish
consumers about financial products population, and what influences them,
and through the provision of financial requires development. A better real
education programmes in the world understanding of these factors
workplace, through our Money Skills enables the design of interventions
for Life programme and through that promote financially capable
schools programmes, including a short behaviours and, ultimately, bring
course that has been designed for the about greater financial well-being
Junior Cycle curriculum. in Ireland.
The aim of the study was to assess The aim of the study was to assess
the levels of financial capability and the levels of financial capability and
financial well-being in Ireland and financial well-being in Ireland, both to
to consider the implications of the inform the CCPC’s work on financial
findings for financial education and education and capability, and to up-
public policy. date our knowledge from an earlier
study, commissioned by the Financial
The definitions of financial well-being Regulator, which measured levels
and financial capability employed in of financial capability in 2008, just
the study are: before the effects of the financial crisis
began to be felt in Ireland3.
1
The study was conducted by Elaine Kempson and Christian Poppe of Consumption Research Norway. It was based on a model which they have designed and that has
been adopted in a number of locations worldwide for studies of financial well-being. The full report is available on www.ccpc.ie. 2The 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. 3The study, Financial Capability in
Ireland: An Overview, was published in early 2009.
6Introduction
The 2008 survey was based closely create 27 measures of behaviour
on a study designed to measure that covered spending, saving,
financial capability in the UK (Atkinson borrowing, money management and
et al. 2006). Its primary focus was on aspects of financial decision making,
behaviours and measuring levels of including product purchase. There was
financial capability rather than focussing considerable overlap in the subject
on knowledge and skills as in many coverage with the five behaviour
previous studies of financial literacy. domains4 identified in the 2008
survey in Ireland. In the 2008 survey,
In the decade since that report was however, some of the measures of
published, the study of financial making ends meet and all of those
capability has continued to develop relating to planning for the future
and the approach used in such studies were actually measuring outcomes,
has been refined, most notably in whereas in the 2018 questionnaire
a large-scale project involving 12 these are included as measures of
middle- and low-income countries financial well-being.
that was undertaken by the World
Bank (Kempson, Perotti, and Scott
Methodology
2013a, 2013b). This work was further
Financial well-being reflects the
developed with a study carried
ability of consumers to have financial
out in Norway, which built on this
comfort now and into the future, and
methodology and separated out
is strongly influenced by consumers’
the measures of financial capability
financial behaviour and their socio-
(behaviours) and financial well-being
economic circumstances, including
(outcomes of those behaviours), as
income, income and expenditure
well as extending the range of factors
changes, working status, educational
likely to influence them (Kempson,
level, and family circumstances.
Finney, and Poppe 2017).
The study identified three key factors
This current study approach reflects
of financial well-being which inform an
international developments in the
overall measure of financial well-being:
study of financial capability, with a
meeting current commitments, being
broader focus on both capabilities
financially comfortable, and financial
and well-being outcomes, using an
resilience for the future. Those key
approach and questionnaire that was
measures are in turn informed by a
developed in Norway, adapted to the
range of other capabilities. A further
Irish context. The same model has
factor, resilience for retirement, was
also been adapted and employed in
measured separately.
Australia, Canada and New Zealand.
In total, the questionnaire contained The study allocated a score between
over 60 questions covering financial 0 and 100 for each factor of well-
well-being outcomes, retirement being or capability. These scores give
and the range of behaviours, or us a guide to how the Irish population
capabilities, which inform financial is doing now.
well-being. These were used to
Making ends meet; Keeping track of money; Planning ahead; Choosing products and Being and staying informed.
4
7Introduction
To facilitate the study, a face-to-face survey of 1,500 individuals aged 18 to 80
across Ireland was carried out by Amárach Research in January and February 2018.
After exclusions a valid sample of 1,401 was tested in the model developed by SIFO.
This was a larger sample than used in many surveys designed to provide a nationally
representative sample size. The questionnaire contained 60 questions to understand
consumers’ socio-economic circumstances, how they manage their money, how
they plan for the future, their understanding of financial products, and how their
disposition and attitudes affect their financial behaviour. The responses they gave
were analysed using the model developed by SIFO to provide scores for a wide range
of factors influencing financial well-being.
The approach employed (by Kempson and Poppe) focuses on both financial
capabilities (e.g. behaviours) and outcomes (that is, financial well-being). From this, a
conceptual model was built bringing together financial well-being, a range of capable
behaviours, knowledge and experience of financial matters, a range of psychological
factors, as well as socio-economic factors. For the results of the Irish research, the
survey data was first analysed using the statistical approach Principal Components
Analysis (PCA). This approach was used to identify an underlying set of aggregate
components from the answers given to the survey questions. This also allowed a
score to be calculated for each component on a scale of 0 to 100. These components
were used as possible explanatory variables in a series of regression models,
alongside socio-economic factors, such as age and income, to establish which had a
significant effect, first on financial well-being and then on each of the behaviours that
determined it.
Figure 1 Conceptual model 2018
Income
Income Attitudes
drops to money
Active
Expenditure saving
increase General
Spending
Not financial
restraint
borrowing well-being
for daily
expenses
Personality Financial locus
of control
Figure 1 above provides an illustration of the factors that have the biggest effects5 on
financial well-being in Ireland and the key behaviours and other factors that drive it.
5
This diagram is restricted to the factors which were scaled from zero to 100 that had a coefficient of 0.20 or greater, along with the economic factors that had large
effects. It thereby captures the most important factors - though not all factors - that have an influence on financial well-being.
8Summary of
Key Findings
Summary of key findings
The average score for the general financial well-being of Irish people is 64 out of
100. The score suggests that the average consumer in Ireland is doing fairly well but
has limited capacity to deal with unexpected events. 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. The overall score
reflects the range of financial well-being outcomes across consumers in Ireland as,
while there were people doing a lot better than this, there were others with scores
well below the average.
While the overall score is useful in terms of seeing where consumers in Ireland are
overall and for international comparisons, the real value in the study is found by
breaking down the overall results into distinct sub-categories. Targeted actions
can then be developed from this. The research team and the CCPC steering group
identified four categories of relative financial well-being among Irish consumers:
52%
Struggling
Just about coping
25%
16% Doing fine now but with
7% little put by
Secure
Struggling Just about coping Doing fine now, but Secure
7% of respondents were 16% of respondents were with little put by 25% of people can be
in financial difficulty within this category. They A majority, 52%, of regarded as financially
now, had no reserves had an average financial respondents performed ‘secure’ with an average
to protect them against well-being score of just well in terms of meeting score of 87 on the
possible income or 41. People within this current commitments general measure of
expenditure shocks, and category appear to be at and had a positive level financial well-being. Both
those who were yet to risk of falling into financial of financial comfort, but their current financial
retire had very little or difficulties currently, they performed less situation and their
no provision for their as well as having little well in respect of their provision for the future
retirement. This category financial resilience for the financial resilience for was strong, although
had an average score future or for retirement. the future, including for their provision for
of 20. retirement. This category retirement left room for
had an average score improvement.
of 66.
9Summary of
Key Findings
The study finds that the overall Though there is scope for
financial well-being of consumers is improvement, compared to other
influenced by a combination of the countries, Irish consumers perform
amount of money they actually have relatively well on the core behaviours
and how they use and manage that driving financial well-being.
money - in other words, their financial
capability. A particular issue identified in the
study is a lack of spending restraint,
Unsurprisingly, the study found that where scores are significantly lower
income had a strong influence on than in a number of other countries.
financial well-being as did the extent
to which consumers had recently The findings suggest that promoting
encountered drops in their income or improvement in all of the core
increases in their expenditure. behaviours will mean addressing
attitudes to saving, spending and
The study found that two core borrowing. The study also found a
behaviours affect financial well-being strong link between formal financial
across all groups directly: active education and financial well-being.
saving, and not borrowing for
daily expenses. By way of contrast, specific knowledge
of financial products and experience
Other behaviours that had an of money management are less
important, if indirect, influence on important factors in determining
financial well-being include restrained overall well-being.
spending, feeling in control of your
financial situation and general Finally, the study found that Irish
attitudes to saving, spending and consumers have low scores generally
borrowing. when it comes to resilience for
retirement6.
Taking control of household and
personal finances is important for The study assessed resilience for
improved financial well-being. retirement among both consumers
who had yet to retire and those who
Feeling responsible for their financial had already retired. Even among the
actions and outcomes affects the ‘Secure’ category, which achieved the
financial well-being of consumers both highest overall financial well-being
directly and in a number of indirect score, respondents scored an average
ways. The results of the study point of 66 in regard to their resilience for
to the need to promote financially retirement. Among the other three
capable behaviours, not least through categories the scores were lower
financial education. and declined largely in keeping with
declines in overall financial well-being.
6
This under-provision has been recognised as a public policy concern for some time. The Irish Government’s ‘Roadmap for Pensions Reform 2018-2023’ included a
commitment to introduce an Automatic Enrolment pension scheme. In turn the Department of Employment Affairs and Social Protection launched a consultation on the
design of an Automatic Enrolment scheme in August 2018. That scheme is expected to be launched in 2022.
10Summary of
Key Findings
We can compare financial well-being in Ireland with a number of other countries.
Similar studies have been carried out in Norway, Australia, Canada and New Zealand
which employed the same definitions and similar methodology. There are some
positives to take away from making comparisons7.
In terms of overall well-being Ireland’s score of 64 is lower than Norway’s score of 77
and just below the score of 65 in Canada, but higher than Australia and New Zealand
who both scored 59 in a study released in early 20188.
7
Similar definitions of financial capability and financial well-being were employed in Norway, Australia and New Zealand 8 https://bluenotes.anz.com/financialwellbeing
11Findings at a Glance
Findings at a Glance
Financial well-being scores for Ireland
80 61
64 Meeting current
commitments
Being financially
comfortable
Overall financial 52 46
well-being score
for Ireland
E
Financial Financial
resilience for resilience for
the future retirement
Scores for well-being categories
87 66 41 20
Secure Doing fine now, Just about Struggling
but with little coping
put by
12Findings at a Glance
Personal circumstances that affect well-being
BILL
Income Education Employment Expenditure
shocks
Financial education-important Key behaviours
for well-being for well-being
Vs
60% of ‘Secure’ category received Active saving Not borrowing
financial education at school but only for daily
10% of ‘Struggling’ category did expenses
Retirement planning
50% 25%
Vs
50% of ‘Secure’ category auto-en-
rolled in workplace pension v only 25%
of the ‘Doing fine now’ category
13Key Findings
Key Findings This measure captures whether
consumers have the ability to pay bills
1. Compared with their counterparts and other commitments on time and
in other countries, people in Ireland have sufficient money for food and
are doing reasonably well in terms other expenses.
of general financial well-being
but have low levels of financial Less than 15% of the people
resilience for the future, including interviewed said that they were
retirement experiencing payment difficulties.
The average score for the general In contrast, the score for being
financial well-being measure in Ireland financially comfortable was
was 649. This is lower than in Norway considerably lower, at 61.
(77) but higher than in either Australia
or New Zealand (both 59). We explore This showed that a large number of
international comparisons further in people did not have a lot of money
the next section. left over after paying for essentials to
allow them to do the things they want
Four measures of financial well-being or enjoy in life.
were identified, three of which make
up the general measure of well-being. The score for the longer-term
measure of financial resilience for the
The measures were: meeting current future was lower still at 52.
commitments, being financially
comfortable and financial resilience
for the future. Financial resilience
for retirement was the fourth, and
separate, longer term measure.
As might be expected, the mean score
was highest (80) for meeting current
commitments.
9
On a scale from zero to 100.
14Key Findings
This indicates that a large proportion As shown in Figure 2, a quarter of the
of Irish consumers have quite poor Irish population could be considered
provision against financial shocks. financially ‘Secure’ (scoring an
Over half of the people interviewed average of more than 80). The largest
scored 50 or less on this measure. category – half of the population –
were people who were ‘Doing fine
The average score for financial now, but with little put by’ (scoring
resilience for retirement - for those between 50.01 and 80). A sizeable
who were yet to retire - was 4610. minority (16%) could be considered to
be ‘Just about coping’ (they scored
This was lower than the measures of
between 30.01 and 50) with 7% of
general financial well-being, including
the population obviously ‘Struggling’
general resilience for the future11.
financially (with scores of 30 or less)13.
2. Financial well-being varies Figure 2 Overall financial
considerably across various groups well-being
of people
Reflective of Irish society generally,
there was a large degree of variation
around the average scores, with some 7%
people doing very well and regularly
meeting all their current commitments 25% 16%
with a comfortable margin, as well
as being relatively insulated against
future income or expenditure shocks12.
At the opposite end of the spectrum,
others, however, are clearly in financial
difficulty. To explore how financial
capabilities are distributed across the 52%
population, the study assigned people
to one of four categories based on
Struggling
their scores for general financial well-
being. Those categories are: ‘Secure’; Just about coping
‘Doing fine now, but with little put by’,
Doing fine now but with
’Just about coping’, and ‘Struggling’.
little put by
Secure
10
This did not form part of the general financial well-being measure and comparable figures are not available for other countries. 11 Resilience for retirement was assessed
through three measures: the extent to which people would have sufficient income without needing to continue to work; the extent to which the provision they were making
for retirement would be likely to provide sufficient income even without the state pension and the proportion of their total retirement income that they anticipated would be
derived from the state pension. 12 The survey did not ask respondents to detail what was the cause of any drop in income or increase in expenditure. 13 The categories are
comparable with those identified in Australia and New Zealand in a similar study conducted earlier in 2018.
15Key Findings
Over the following pages we Who are they? The oldest of the four
outline the four categories, with categories, with an average age of
more detail about the key factors 53, they are the most affluent with an
that explain their differing levels of average gross income per person of
financial well-being. €52,899 per year. They are the least
likely to have experienced an income
Secure: 25% of respondents are shock or expenditure increase in the
considered to be financially secure, past 12 months. They have the highest
with an average score of 87 for overall levels of education, with 53% holding
financial well-being. a university degree. Almost none are
unemployed or unable to work due to
Both their current financial situation
sickness or disability.
and their provision for the future are
strong. Although generally doing well,
What about the key behaviours?
their provision for retirement left room
Members of the ‘Secure’ category
for improvement.
have the highest levels of financial
They have very high scores for capability. They have a high score
meeting financial commitments (98) for a key positive behaviour with
and financial resilience for the future an average of 83 for active saving.
(85), while their average score for Almost none of them borrow to pay
being financially comfortable was also bills or meet daily living expenses –
very positive (82). 50% have more they have an overall score of 94 for
than 12 months income in savings this measure. They are quite confident
while a further quarter have between about their ability to manage money
6 and 12 months income saved. (73) and take quite a high degree
of personal responsibility for their
Financial resilience for retirement financial decisions and outcomes (74).
among working age members of the
‘Secure’ category is good, but less Did they learn about money when they
positive than other well-being factors. were young? Three quarters of them
Their overall score is 63 – much lower said that their parents had discussed
than their general resilience for the money with them as a child and six
future. While 48% report that they in ten recalled being taught about
would have adequate income in managing money or saving when they
retirement, even without the State were at school or college.
pension, 12% would rely on it entirely
and a further 21% report it would
account for two thirds of their income.
Among those who have adequate
supplementary provision, half have
been automatically enrolled in a
workplace pension.
16Key Findings
Doing fine now, but with little Who are they? This category
put by: By far the largest of the four was most reflective of the overall
categories - 52% of respondents fell population. They have an average age
within this category – they have an of 46 with average gross income per
overall financial well-being score person of €40,100 per year. Few in this
of 66. category have experienced income
shocks or significant expenditure
In regard to meeting financial increases in the past year. They
commitments they are doing well, with are also generally unlikely to be
an average score of 83. However, 45% unemployed or unable to work due
of them report occasionally struggling to sickness or disability. 43% hold a
to pay their bills or meet other university degree.
commitments on time. Compared
to the secure category, they have
What about the key behaviours?
less leeway in their budgets, with an
People in this category scored well on
average score of 63 in terms of being
financial capability, though less well
financially comfortable.
than those in the ‘Secure’ category.
They scored 70 for active saving and,
This category perform less well in
with a score of 86, almost none of
terms of financial resilience for the
them borrow for daily expenses. They
future. Their average score is 51,
are fairly confident in their ability
pointing to a lack of provision against
to manage money (62) and take
financial shocks in future. For example,
a reasonable degree of personal
54% have more than three months’
responsibility for their financial
income in savings, considerably lower
decision making (67).
than the secure category.
Lower still was this category’s score Did they learn about money when
for financial resilience for retirement. they were young? Two thirds of this
In measuring the resilience of those category reported discussing money
yet to retire, the study scored this with their parents as a child, while
category an average of 47, pointing to 52% said they were taught about
major under-provision for retirement managing money or saving when they
among a large segment of Irish were at school or college.
consumers. Only one quarter of
this group report that they would
have sufficient income in retirement
without the State pension. A further
quarter have been automatically
enrolled in a workplace pension. 51%
of respondents are expected to rely
on the State pension for two thirds or
more of their income in retirement.
17Key Findings
Just about coping: Consumers in – €30,969. One in five of them has
this category account for 16% of the experienced a substantial drop in
population. They have an average income in the past 12 months, which
score of 41 for overall financial well- is double the average for all groups in
being and show signs of some strain the study. A quarter have seen their
on their finances. expenditure rise substantially in the
same time period. With an average
Although they have an average age of 43, they are the youngest of the
score of 60 for meeting financial four categories.
commitments, they have little room
for manoeuvre in their finances One in ten of them are unemployed
and scored 41 on average for being – twice the average for all groups in
financially comfortable. Close to a the study. This category contained
third of this category said that it is the highest proportion of part-time
a constant struggle to pay bills on workers (19%) of all the categories.
time and 57% said that they struggle Like those in the “Doing fine now, but
occasionally. 46% said that their with little put by” category, they were
finances do not allow them to do the fairly well-educated with 24% holding
things that they wanted to in their a university degree and 20% holding
leisure time. a further education qualification. Over
50% rent their homes – well above the
In addition, this group has very little national average.
money put aside to cover them
against income or expenditure shocks
What about the key behaviours?
– with an average score of 22 on
People who are ‘Just about coping’
the financial resilience for the future
had much lower levels of financial
measure.
capability than the previous two
categories. They have a particularly
Seven in ten of them (68%) have less
low score for active saving (41)
than a month’s income in savings
although most avoid borrowing to pay
and a further two in ten (20%) have
bills or meet daily living expenses (77).
between one and three months’
They are not particularly confident
income put by.
about their abilities to manage money
They had a low score for financial (54) and take a moderate degree
resilience in retirement (30). 72% said of personal responsibility for their
that they would not have an adequate financial decisions and outcomes (60).
income in retirement without the
State pension, which would make up Did they learn about money when
all of their retirement income for a they were young? Half of this category
third of people (32%) in this category. (52%) said that their parents had
12% were automatically enrolled in a discussed money with them when they
workplace pension. were young, and 44% recalled being
taught about managing money or
Who are they? This category has saving when they were at school
below-average gross annual incomes or college.
18Key Findings
Struggling: About 7% of consumers Who are they? These consumers
are struggling financially. They have have gross average annual incomes
an average score for overall financial of €23,878 – less than half that of the
well-being of 20 and consistently low ‘Secure’ category. Further comparison
scores across all the more detailed to the ‘Secure’ category shows that
measures. they are eight times more likely to
have experienced a substantial
They have a score of 39 for meeting income drop in the past year and
financial commitments indicating four times as likely to have had a
that they are in financial difficulty. substantial expenditure rise.
Three quarters said it was a constant
struggle to pay bills and meet their They have an average age of 44, one
financial commitments on time, while a third are unemployed and a further
further quarter state that they struggle 8% are unable to work due to illness or
from time to time. With an average disability. They have the lowest levels
score of 6 for financial resilience of education, with 50% having been
for the future they have essentially educated to Junior Certificate
no protection against income or or below. Half of this category rent
expenditure shocks. 94% of this their home.
category have less than one month’s
income in savings, and most of the rest What about the key behaviours?
have less than three months. Members of this category have the
lowest levels of financial capability
They have almost no leeway in
across the board. They have an
their budget as demonstrated by
average score of 30 for active saving
their average score of 18 for being
and while scoring 74 for not borrowing
financially comfortable. In fact, 89% of
for daily expenses, this was the lowest
respondents said that their financial
overall score for that indicator.
situation did not allow them to do the
things they wanted in their leisure time. People in the ‘Struggling’ category
have low levels of confidence in their
When it came to financial resilience
ability to manage money (47) and
for retirement, they have an average
tend to feel a low degree of personal
score of 17, with hardly any of the
responsibility for their financial
respondents of working age saying
decisions (51).
that they would have an adequate
income in retirement without the
Did they learn about money when
State pension. In fact, 55% said that
they were young? 38% recalled
all of their income in retirement would
discussing money with their parents
come from the State pension while a
as children, while little more than one
further 27% estimated that it would
in ten reported being taught about
contribute at least two thirds of their
managing money or saving when they
total retirement income. Just 8% of
were at school or college.
this category have been automatically
enrolled in a workplace pension.
19Key Findings
Figure 3 Financial well-being scores at a glance
100
90
80
70
60
50 98
83 82 85
40
30 60 63 63
51
47
20 39 41
30
10 22
18 17
6
0
Struggling Just about coping Doing fine now but Secure
with little put by
Meeting Financial Commitments Financial Resilience for the Future
Being Financially Comfortable Financial Resilience for Retirement
3. Socio-economic factors have a crucial influence on financial well-being
The study assessed the effect of a wide range of socio-demographic and economic
characteristics which included age, gender, family circumstances, income, changes
to income and expenditure, economic activity status, educational level, housing
tenure and geographical area. The model employed in the study identified the
independent effect of each factor after holding all the others constant. This allowed
for the identification of those characteristics that directly influence financial well-
being. The study identified correlations in the analysis. The initial regression models
used included a very large number of variables and as such it was possible to rule
out some alternative explanations for the correlations found - and equally identify
evidence that supports the explanations that were put forward.
The study bears out what would be intuitively assumed; namely that higher incomes,
more stable working lives, having responsibility for household finances, as well as
your own, and higher educational attainment are all associated with higher financial
well-being.
However, only people in the ‘Secure’ category have positive scores for resilience
for the future, implying an ability to deal better with income shocks or expenditure
increases. Unsurprisingly lower scores across all measures of financial well-being are
also strongly associated with economic factors, including income level and experience
of either a substantial income fall or a substantial increase in household expenses.
People with the lowest scores included those who are unemployed or unable to work
through sickness or disability. Another group with low scores are part-time workers.
20Key Findings
Overall, socio-demographic factors are not nearly as important as economic factors.
However, as shown in Figure 4, the study found a strong association with education,
with those educated to Junior Certificate level or below at particular risk of having
low financial well-being. In addition, renters also stood out as having much lower
scores than home owners, particularly those that owned their home outright.
Figure 4 Percentage of consumers in each segment who are tenants or educated to
Junior Certificate.
60
50
40
30
54% 53%
50%
20
32% 32%
26%
10
17% 20%
11% 15%
0
Struggling Just about Doing fine Secure All
coping now but with
little put by
Tenant Junior Certificate
21Key Findings
4. Behaviours have an important fifth of the population either cannot or
impact on financial well-being does not save. As would be expected,
income levels and employment status
The study found that financial well-
have an important influence on the
being is influenced by a combination
ability of consumers to save. Other
of the money people have, how they
factors influencing active saving
use and manage that money and
included whether consumers had been
their inclination to save and to avoid
educated beyond Junior Certificate
borrowing for daily expenses. Key
and whether they managed household
behaviours such as active saving,
finances or just their own. Higher
not borrowing for daily expenses and
educational qualifications and having
restrained consumer borrowing all
responsibility for household finances
have a direct effect on financial well-
had a positive effect on active saving.
being – with the first two having an
effect across all three factors of well-
The biggest behavioural influence
being: meeting current commitments,
on active saving, in turn, is the ability
being financially comfortable and
of consumers to exercise spending
financial resilience for the future.
restraint, while making informed
decisions also has a substantial effect.
Restrained consumer borrowing has
an important effect on the ability
Feeling in control of your finances
of people to meet their current
also has a large influence on active
commitments but is less important for
saving15. This measures whether
having financial comfort or in terms of
consumers feel personally responsible
financial resilience. As shown on the
for their financial situation or not, and
next page, the key behaviours are in
as such whether it is to a greater or
turn influenced by other behaviours.
lesser extent outside of their control.
Unsurprisingly, income level and
5. Being an active saver makes a work status are directly related to
big difference the extent to which consumers feel
The study found that people in Ireland they have such control. The study
are moderately good savers, with found that believing that you are
a score of 68, particularly when responsible for your finances leads
compared with other countries. The to more active saving behaviour. In
Norwegian score for active saving addition, attitudes to saving, spending
was 75, while in Australia the score and borrowing, as measured in the
was 63 and in New Zealand lower still study, have a strong influence on the
at 60 (see section on International likelihood of consumers to save.
Comparisons). As recorded in Central
Bank of Ireland statistics, Irish
households have been gradually
building up their savings over the past
three and a half years14. However, one
(https://www.centralbank.ie/docs/default-source/statistics/data-and-analysis/credit-and-banking-statistics/private-household-credit-and-deposits/trends-in-
14
personal-credit-and-deposits-june-2018.pdf?sfvrsn=9). 15 This is measured in the study as ‘locus of control’.
22Key Findings
Thinking about finances with a long term view is likely to incline someone to be an
active saver. Finally, being taught about money both at school and by parents or
guardians had a positive effect on saving capability. This is an important finding for
the work of the CCPC.
6. Most people do not borrow for daily expenses
The overall score for not borrowing for daily expenses (86) was very positive, and
this was a trend across all four categories of consumers. It means that most people
rarely use credit to pay for food or other daily essentials, and nor do they borrow
to pay off debts or rely on their overdraft facility. People who managed both the
household finances and their own money are less likely to borrow for daily expenses.
A small minority of consumers, however, have low scores for this factor indicating
that they are in a particularly tight financial situation. However, income levels are less
important in explaining this than drops in income or sudden expenditure increases.
The study found overlapping influences on whether consumers borrowed for daily
expenses or not. As might have been expected, exercising spending restraint,
consumer attitudes to spending, saving and borrowing, and feeling in control of their
finances are the key drivers for this behaviour. On the other hand, financial education
seemed to have little or no effect in this area, unlike in relation to active saving.
The spread of these key behaviours across categories of consumers is shown in
Figure 5.
Figure 5 Average scores for the key behaviours across each segment.
100
90
80
70
60
50
94
86 83 86
40
74 77
70 68
30
51
20
33
10
0
Struggling Just about Doing fine Secure All
coping now but with
little put by
Active Saving Not Borrowing for Daily Expenses
23Key Findings
7. Knowledge and experience helps, managing their money and felt a high
but it is not as important as sense of control of their personal
behaviour finances. They also were the most
likely to report receiving financial
One area in which knowledge and
education at school.
experience has an influence is on
restrained consumer borrowing.
Better knowledge of money 9. Overall provision for retirement
management and experience of is poor
managing money and using financial The study measured provision for
products makes people less likely to retirement separately to the other
borrow for consumption – but the indicators of well-being. It found that
effects are quite small. Again, this is provision both for people who are
separate to the important effect that below retirement age and for those
financial education more broadly has who have already retired is poor
on financial well-being. overall (see Figure 6). With an overall
average score of 46 this was lower
8. Some people have consistently high than the scores for general resilience
levels of financial well-being for the future. This means that while
Irish consumers generally have
As we have seen, income has a strong
provision for a rainy day, their longer
effect on financial well-being, as do
term prospects in retirement are not
a range of other socio-economic
so good.
factors. The study shows, however,
that it is the interaction of factors such
A number of reasons for this
as income and housing tenure with
stand out. A substantial number
behaviours that have a positive effect
of respondents to the survey have
that lead to greater financial well-
low supplementary provision for
being. The ‘Secure’ category, which
retirement beyond the State pension
has the highest average financial
(47% of people yet to retire have
well-being, also has the highest
made no provision beyond the State
average income, the highest levels of
pension). Even among those who
education of the four categories and
are already retired and who have a
was typically older than the average.
supplementary pension, the financial
They meet current commitments with
outcomes for many have been
ease and have a high level of financial
underwhelming.
comfort.
Their resilience for the future is
also substantial. They typically
have positive scores for retirement
resilience but less so than their score
for general resilience for the future.
They tended to be confident about
24Key Findings
A wide range of factors influence whether people have resilience for retirement,
ranging from income and work status to educational attainment and housing tenure.
There were also regional disparities, with residents of Dublin having a higher level of
resilience for retirement than the national average. The prevalence of employers with
workplace pension schemes (particularly the public sector) in the Dublin area may
account for much of this.
Being an active saver also has a positive effect on pension provision. The study
found a strong link between better pension outcomes and having been automatically
enrolled in a workplace pension scheme. In particular auto-enrolment had a large
positive effect. Simply having the option of enrolling in a workplace pension scheme
was not enough, the study found it is better if consumers have to consciously ‘opt out’
rather than placing the expectation on them to ‘opt in’ to workplace pensions.
Figure 6 Average scores for resilience for retirement among the non-retired population.
70
60
50
40
30
63
48 46
20
30
10
17
0
Struggling Just about Doing fine Secure All
coping now but with
little put by
25International
Comparisons
International Comparisons Even though the Irish scores are lower
than the Norwegian scores, compared
How does financial well-being in with Australians and New Zealanders,
Ireland compare with other countries? Irish consumers do not do too badly
on these core capabilities.
Similar studies have been carried out
in Norway, Australia, Canada and The one exception relates to a lack of
New Zealand and there are some spending restraint, where the average
positives to take away from making score (67) is lower than in Norway (71),
comparisons. indicating a lower level of spending
restraint in Ireland but also lower
In terms of overall financial well-being
than in Australia and New Zealand too
Ireland’s score of 64 is lower than
(both 74).
Norway’s score of 77 and Canada’s
score of 65 but higher than Australia Irish consumers had positive scores for
and New Zealand who both scored active saving (68) and not borrowing
59 in a study released in early 201816. for daily expenses (86), with only
In terms of the sub-measures of Norwegian consumers scoring better.
well-being, Ireland performed better
than Australia or New Zealand but The Norwegian score for active saving
underperformed compared to Canada was 75, in Canada the score was 68,
and Norway. while in Australia the score was 63
and in New Zealand lower still at 60.
Irish consumers performed well for However regarding spending restraint
meeting financial commitments, and having financial confidence, Irish
scoring an average of 80. Norwegian consumers scored lower than their
consumers scored an average of 91, counterparts in the other countries.
Canadians scored 81, in Australia the In respect to feeling personally
score was 70, while New Zealanders responsible for your financial situation
scored 72. For being financially Irish consumers scored better than
comfortable the scores ranged from Australians and New Zealanders but
70 (Norway) to 61 (Ireland), and lower than Norwegians17.
down to 55 (Australia) and 54 (New
Zealand). Finally, financial resilience There was no equivalent data relating
for the future was an area where to resilience for retirement in any
Irish scores (52) were equivalent to of those countries and as such no
Australians (53) and New Zealanders comparisons are possible.
(52). Norwegian consumers by
contrast scored an average of 73
while Canadians scored 60.
16
https://bluenotes.anz.com/financialwellbeing. 17 Spending restraint: Ireland (67), Norway (71), Australia (74), New Zealand (74). Financial confidence: Ireland (62), Norway
(71), Australia (65), New Zealand (66). Locus of control: Ireland (67), Norway (71), Australia (61), New Zealand (61).
26Conclusions
Conclusions and and discuss the findings and their
Recommendations implications. The study has established
that a number of factors impact on
This is the first study that gives an
financial well-being. Naturally some
insight into both financial capability
of these relate to income levels and,
and well-being in Ireland. It provides
for some consumers, information to
both the CCPC and other stakeholders
promote better financial capability
with valuable insights and further
is unlikely to provide either comfort
provides suggestions for how the
or help. In these instances more
financial well-being of consumers in
appropriate responses lie in public and
Ireland could be improved through a
social policy supports. Having said that,
range of actions.
if one considers the longer term, the
The CCPC’s statutory functions report suggests that a lower proportion
empower us to promote and of consumers may find themselves
protect the interests and welfare of in financial difficulty if interventions
consumers18, as well as entrusting are made, particularly at an early
us with a specific role in providing age. While financial education is by
information in relation to financial no means a panacea which can solve
services, and promoting the broad income disparities in society, it
development of financial education has a valuable part to play in a wider
and capability19. The authors of the series of overall State supports.
study identified a number of key
areas that they believe require future Financial education initiatives
attention, whether by the CCPC, or Since its establishment in 2014, the
other organisations. In that regard CCPC has focussed on delivering
the CCPC has developed a number three core programmes of financial
of strategic priorities for delivery education: Money Skills for Life,
between 2019 and 2021. We deal here Money Matters and Money Counts.
with areas within the CCPC’s remit. In commissioning a study on financial
capability and well-being, the
However, we suggest that other
CCPC was motivated by a wish to
stakeholders could usefully consider
understand more fully the role that
the findings of the study to inform their
financial education can play, and
own activities in promoting financial
crucially, what we should focus on to
well-being, including in consideration
support the financial well-being of
of reform of the pensions framework
people in Ireland. Our objective is that
and support for the most financially
these programmes and the financial
vulnerable. The findings should also
information that we provide have
prove useful to those involved in
a tangible benefit. To that end it is
the provision of financial education
essential that we understand what
initiatives. The CCPC will proactively
will be most effective and select the
engage with stakeholders in the
most important areas to focus our
financial education sphere to share
efforts on.
18
Competition and Consumer Protection Act 2014, Section 10(1)(b) 19 Competition and Consumer Protection Act 2014, Section 10(3)(j)
27Conclusions
Building on the findings of the study, This study provides further evidence
the CCPC will review and revise the that the overall policy objective of
materials and supports that we automatic enrolment is correctly
provide for financial education. In targeted and can be expected to have
addition, the CCPC has identified a positive effect on the resilience for
specific strategic themes for its retirement of Irish consumers. The
financial education work to ensure CCPC will contribute positively through
that efforts are focussed on particular our advocacy work to the pension
objectives that take account of the reform agenda, as well as fulfilling
study’s findings and seek to influence its statutory mandate as it relates to
children at an early age. information and education regarding
pensions.
Policy initiatives
Active saving
In fulfilling our statutory role to
promote and protect the interests and The study has found however that
welfare of consumers, the CCPC works for many consumers in Ireland,
to influence public debate and policy their financial well-being could and
development, promoting competition would be improved through two key
and highlighting the interests of behaviours: active saving and not
consumers20. The study contains borrowing for daily expenses. The
valuable findings to support this crucial question arising is ‘what can be
work. Specific themes emerge in the done to influence those behaviours?’
study that point to an opportunity for and in many cases, the ability of
the CCPC to seek to influence policy consumers to save and/or not
development. borrow for daily expenses is limited
by their income. Such matters point
Resilience for retirement to public and social policy supports.
However, initiatives that support the
The study makes the strong
development of active saving will be
observation that automatic enrolment
supported by the CCPC. In addition,
in a workplace pension scheme
there are also obvious learnings for
is a decisive factor in increasing
our financial education programmes.
consumers’ levels of resilience for their
retirement. Simply having the option
Financial confidence is important, and
of enrolling in a workplace scheme is
financial education can help
not sufficient on its own. The CCPC
is aware that a core objective of the There was also a clear link between
Government’s Roadmap for Pensions higher financial well-being and
Reform 2018 – 2023 is to introduce engagement with financial services
a system of automatic enrolment to – and therefore financial inclusion -
increase the levels of supplementary even when other factors were taken
retirement savings coverage. into account.
20
CCPC Strategy Statement 2018-2020, Strategic Goal 3
28Conclusions
Promoting greater engagement with financial services would clearly have a beneficial
effect on all measures of financial well-being. However, specific aspects of knowledge
and experience were not as important21. For consumers, having confidence in their
ability to deal with different aspects of money management and decision-making,
and accepting personal responsibility for their finances, were also significant. Also
important, was the positive effect of having received financial education at school. All
these findings point to the benefits of the provision of financial education in the school
system and the CCPC will work to advocate for this.
By way of illustration, among other things the study tested for were whether consumers’ understanding of risk, knowledge of money management or experience of
21
money management had effects on their well-being.
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