Dormant accounts financial inclusion programme - Statement of intent
Sir Leigh Lewis (previously Permanent Secretary for the Department for Work and Pensions in 2006-2011, now retired) is chairing an independent recruitment panel tasked with selecting the Founding Chair of the new Dormant Assets Financial Inclusion Organisation (DAFIO).
This new organisation will tackle financial exclusion and will be endowed with £55 million of Dormant Assets funding earmarked to address this social issue. The information below outlines work carried out in 2018 to set up DAFIO.
For more information on the Founding Chair, visit http://www.green-park-jobs.co.uk/dafio/index.php
On 9 August 2018, the Government announced that it will fund the establishment of the new Dormant Assets Financial Inclusion Organisation, which will be responsible for deploying £55 million of funding from dormant accounts. DAFIO will primarily address the problem of access to affordable credit and alternatives. The organisation will aim to bring in co-funding from a range of investors, including the private sector working on the issue of financial inclusion.
This statement sets out the process, centred on the users of these products and services, which will shape how that money is used and the outcomes it aims to achieve.
Statement of Intent
When you struggle financially it becomes increasingly challenging to support your family and to maintain your mental health and wellbeing. Many people slide into problem debt and struggle to get by.
Making good use of appropriate financial products and services – savings, borrowing and insurance – can help build the financial resilience needed to withstand the down times and dramatically improve lives.
We need to address financial capability and financial inclusion together if we are to make a difference. This means that the use of funds from dormant bank and building society accounts must complement the work of the newly established Single Financial Guidance Body whose role it is to improve levels of financial capability in the UK.
We know from consumers who took part in the Financial Conduct Authority’s 2017 Financial Lives Survey in 2017 that access to fair, affordable and appropriate products can be limited, particularly when needed during certain life stages and for certain groups of people.
- High cost credit and rent to own. 6% of all UK adults used high cost credit (where the APR is equal to or above 100%) in the previous 12 months. This includes payday loans, home collected loans, hire purchase and other similar products. Use of high cost loans is highest among 25 - 44 year olds (9% of the population) and younger single parents are three times as likely to be using high‑cost credit than the UK average. Access to affordable credit is crucial to help people manage their finances and deal with unexpected events.
- Savings buffer. 13% of UK adults have no cash savings, 24% have less than £1,000 as a savings buffer and 19% hold between £1,000 and £5,000. Younger adults are most likely to have few or no savings, with 57% of 18-24 year olds holding less than £1,000. This severely restricts their capacity to manage transitions, such as moving to rented accommodation for the first time, or external shocks, such as ill-health or redundancy.
- Adequate insurance. While 48% of 25 - 34 year olds rent their homes, only 19% have home contents insurance. Some of them are paying more for individual insurance contracts to cover phones, white goods, furniture, perhaps through rent-to-own contracts, rather than covering all of their contents for less, in one insurance policy.
Engagement of Stakeholders and End Users
During 2018, a joint project team from BLF and DCMS, with close involvement from HM Treasury, the Department for Work and Pensions, and the Financial Conduct Authority, has been able to be more precise on where the focus of DAFIO might be.
collaborative series of interviews, focus group discussions, roundtables workshops and surveys have helped us explore the barriers faced by end users, the gaps in the market and how to maximise the impact of £55m funding to tackle access to fair, appropriate and affordable financial products and services.
In our engagement with the stakeholders, we:
- Arranged four roundtable discussions on funding financial inclusion, credit provision, savings products and insurance products
- Received feedback from 124 respondents to our three surveys
- Arranged 40 one-on-one meetings or calls with housing associations, funders and investors, researchers, and banks
- Engaged with 98 individuals/organisations in total, through the roundtables and other meetings.
The project has also been aided by a research report, comprising further in-depth information on the process of the research, our findings and the specific design of the delivery of interventions.
Often, financial inclusion research reports are written from a statistical or quantitative perspective. Our report is led by the stories of people who continue to experience barriers to accessing fair, appropriate and affordable financial products and services. This has allowed us to listen to their suggestions about how things could be improved.
Read the report Understanding The Decision Making Of People Experiencing Financial Exclusion (pdf, 853KB).
Visit www.gov.uk/government/publicat... for the entire Civil Society Strategy.
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