The UK has a complex financial system and, with changes in social attitudes over time and growth in retail-led culture, this has made it difficult for many to understand and manage their money optimally. For example, the Money and Pensions Service 2018 Adult Financial Capability Survey indicates that 21% of the adult population rarely or never save. The UK Strategy for Financial Wellbeing, led by MaPS, recognises the need to influence a system that encompasses regulations, products, services and culture, in order to better support people’s financial wellbeing.
The UK Strategy for Financial Wellbeing is seeking to positively influence financial wellbeing in the UK, and the Money and Pensions Service wishes to understand how this could be supported through a programme of behaviour change interventions. Ipsos MORI were commissioned to conduct a review of existing literature and interventions that have aimed to change financial and other behaviour.
This report includes:
A review of interventions and programmes about people’s money and pensions behaviour, reviewing evidence from over 40 studies;
A review of national behaviour change programmes from other sectors and other countries, to understand how people can be encouraged to change their behaviour; and
A consideration of the scope for changing the way that people engage with their financial wellbeing, through a UK-wide behaviour change programme.
As well as a literature review, the study conducted in-depth interviews with eight experts from the public, private and academic sector, to help identify and understand emerging behavioural science theory and practice and to support conclusions about success factors for behaviour change initiatives
The report identifies three key areas of behaviour as necessary and important for achieving sustained behaviour change in terms of financial wellbeing:
Awareness, knowledge and skills:
- Awareness, knowledge and skills are necessary to help individuals make better financial decisions, and are important preconditions for financial wellbeing.
- However, they are not sufficient to change long-term behaviour on their own.
- Interventions are often based on the concept of a ‘rational consumer’ – and their effectiveness is limited because people are not always rational: they may be aware of the right action to take, and how to take it, but will not always act on that knowledge, and may prioritise other aspects of their lives.
- Results can be improved by making interventions experiential, ‘just in time’ and by considering channels and messengers, but their impact on financial behaviour will only ever be limited.
Mindset and attitudes:
- Five components of mindset (scarcity, self-control, self-efficacy, confidence and shame) help to explain why individuals may not engage with their financial wellbeing.
- Numerous interventions have used nudges and defaults to change the choice architecture around how people make financial decisions. These are important and have led to positive outcomes in many cases.
- However there is only limited evidence about the ability of nudges to alter motivation and thereby long-term behaviour, while defaults are unlikely to affect motivation or engagement and can have unexpected consequences.
Social identity and connections:
- People do not just react to the world around them: they make sense of the world through the lens of their own identity, and this shapes their decisions and long-term behaviour.
- A key concept is prospection: people imagine the future, based on their identities and their aspirations, and use this to identify the immediate actions they might take.
- This helps people prepare for and adapt to, rather than control, future events, and as such has a positive impact on people’s self-confidence, their belief that they can make a good decision, and their motivation to engage in those decisions.
- The challenge is that, in the UK, people’s identities are likely to be associated with spending money today, rather than saving it for tomorrow.
- The use of social norms is one route to influencing people’s social identities – but it brings challenges: people may not react to norming in the expected way.
- Instead of trying to change people’s social identities, it may be easier and more effective to instead align ideal behaviours with people’s existing and strongly-held values.
The report identifies a number of attributes of, and considerations for, behaviour change programmes, including that any programme should be:
Long-term: enabling interventions to address both specific behaviours in the short-term as well as building financial resilience in the longer-term.
Holistic: to ensure that a gain in one area of financial wellbeing does not come at the expense of another.
Multifaceted: employing a range of intervention types to target both the individual and the wider environment or system.
Collaborative: involving partnerships with a range of other parties.
The report concludes that there is scope to develop a major UK behaviour change programme that focuses on the way people think about and engage with their money and pensions.
Points to consider:
Methodological strengths and limitations:
- There are no details about the selection criteria for the literature review, or the topic guide used for the expert interviews.
- This report is relevant to all stakeholders, academics and policymakers with an interest in developing behaviour change programmes, particularly in the financial services sector.
- It is also relevant to those interested in financial wellbeing and financial capability, as well as those interested in behavioural science theory.
Generalisability / transferability:
- The research is largely (although not entirely) UK-focused, and therefore is relevant to the UK.
- The research will also be relevant outside of the UK, although consideration will need to be given to its relevance in countries with different cultural attitudes to money.