Has the penny DR PPED? Our tenants attitudes towards money and the implications for welfare reform INANCIAL INCLUSION

Transcription

1 Has the penny DR PPED? Our tenants attitudes towards money and the implications for welfare reform INANCIAL INCLUSION

2 Contents Foreword from Mark Rogers, Group Chief Executive 4 Executive Summary 5 The Survey in Detail Part 1 Study of Financial Behaviours 1.1 Banking Banking Services Saving Credit Unions Debt Advice Home Contents Insurance 9 Part 2 Attitudes Towards Money 2.1 Stress and Money Control of Money Support with Money Personal Responsibility Technology 12 Part 3 Segmentation 3.1 Group 1 Rob s Profile Group 2 Tina s Profile Group 3 Michelle s Profile Group 4 Martin s Profile Group 5 Ruth s Profile 18 Conclusions

3 4 Foreword from Mark Rogers In the coming months our tenants are facing a perfect storm, a series of substantial, high impact changes to their external environment, arriving all at once. These include an increasing lack of affordable housing, higher energy and food prices, direct payments of benefits into their bank accounts rather than to their landlord, cuts and freezes to benefits and an overall benefits cap. All of this is against a backdrop of economic stagnation and low employment prospects. Early evidence suggests that this is likely to result in financial difficulties, as people who are already struggling may resort to payday lenders and illegal high interest loan services, to make ends meet. Many could face heartbreaking daily decisions between eating or heating their homes. Housing associations will play an important role in ensuring that their tenants receive the right type of support that they need. We believe it is crucial to the success of these policies that the Government underpins its changes to the welfare system by providing information and face-to-face advice to those who are affected. Online solutions alone are not enough. Our report provides a useful snapshot of our tenants financial situations and their attitudes towards banking and money. For example, it is concerning that even though welfare reforms are yet to start, 30 of our tenants already find themselves lying awake at night thinking about money issues. Furthermore, while only 4 are unbanked and have no bank account, the greater problem is that so many are underbanked they do not often use banking products or online banking - with 57 preferring to use cash. The research identifies segments of customers with particular advice needs and has already been an invaluable tool for us to focus our financial inclusion and money advice services to help the right people. For example, one of the key findings is that those who are most likely to want to receive money advice are often those who are least in need of guidance. Or to put it another way, if your money situation is comfortable you are more likely to be willing to talk about it, but if you are in serious trouble, you might not want to discuss it. So, we need to look at new ways to engage those most in need of support. The report also shows that our tenants will need more advice to help them respond when the Government brings together all benefits under the Universal Credit later this year. At the moment most social housing tenants pay their housing benefit directly to their landlord. As part of Universal Credit which brings together many benefits under one payment the Department of Work and Pensions (DWP) is planning to introduce direct payments. This means that most recipients will receive all of their benefits in one monthly lump sum to their accounts for the first time ever, rather than their rent being paid direct to their landlord. Most of our tenants will not be used to receiving this amount of money at once, and may have difficulties in the transition to the new system. Some will want support to help them understand the changes and manage their money. The DWP is keen for these direct payments to be made online and for advice to be internet-based. However, our research shows that 45 of our customers don t have internet access at home, and can t access online advice. So, for many, online solutions will not work, and face-to-face advice is the most effective way to guide people through the changes. In the light of this, our recommendation is that the Government should provide a guarantee of at least one face-toface money advice session for each new recipient of direct Universal Credit payments who needs it. In this way, we can prepare people for the perfect storm, give them the information and guidance they need, and help them to navigate towards proactive management of their resources. Mark Rogers, Group Chief Executive, Circle Housing Group Executive Summary Background The Financial Inclusion Profiling Project has been supported by Lloyds Banking Group and conducted by Sterling Research Ltd. A total of 1,144 surveys were completed by Circle customers across the Group s geographic locations including a full range of ages, demographic groups and tenure types. Key findings Most tenants have bank accounts but do not regularly use them 4 of our tenants do not hold a bank account However, 57 of tenants say they prefer to use cash to pay for things The problem is therefore not so much that our customers are unbanked don t have a bank account but that they are underbanked they have an account but don t use it and will need support in how to use banking services more effectively. Our tenants want to take responsibility for their finances but need support 72 agreed that if I take care of myself now, life will be better in the future 62 think that saving for the future is important and something that I have to do 57 agree that I d like to be able to save but I never seem to have any money to put by. Saving and contents insurance are not widespread amongst tenants Less than half (38) of our tenants save on either a regular or an occasional basis Only 40 of our tenants have home contents insurance which means, in the event of a fire or burglary, they could end up losing everything Only 5 are members of a Credit Union which means most of our customers rely on high street providers or payday money lenders for credit. Many of our tenants don t have access to internet and are not confident using technology Only 55 of tenants have internet access at home Only 46 feel confident using technology This means that while the Government wants Universal Credit applicants to receive their payments and support online, many of our tenants do not have access to the internet. Many of our tenants feel stressed about money and don t know where to start 30 of tenants find themselves lying awake at night thinking about money issues 24 say they don t know where to start to improve their financial situation However, only 17 of our customers have received debt advice in the last six months. Recommendations Information Many of our customers are not aware of the changes to welfare which are facing them and how these will affect their finances. If the reforms require a change in behaviour and adaptation to new ways of managing their lives, tenants will need information. Our research and segmentation of customers shows that a one-size-fits-all approach will not be as effective as targeted communications. We are therefore keen to work with the Government to ensure that all those who are affected (and those who are not affected) by welfare changes are properly informed through specific and timely communication. Advice The new Universal Credit system will mean that for the first time many tenants will have all their benefits paid to them directly in one monthly sum rather than to their landlord. Many of them will not be used to receiving this amount of money in one payment and will require support to help them understand the system and manage their money. Given that 45 do not have access to the internet in their homes, online advice solutions will not be sufficient. People are often unsure of where they can go for advice and where they can turn for support to help them through the transition. We are therefore calling on the Government to provide a guarantee of at least one face-to-face money advice session for each new recipient of direct Universal Credit payments who needs it. 5

4 The Survey in Detail Part 1: Study of Financial Behaviours This study looked at the behaviour of our tenants across five areas of money and finances. These included banking and saving activity; the use of credit unions; engagement with debt advice; and take up of home contents insurance. 1.1 Banking For people to function successfully in society, a bank account is essential. Of those tenants we surveyed, 4 of tenants did not hold any form of bank account. Of those surveyed 54 had a current account an account which allows you to have an overdraft or earn in-credit interest. 33 had a basic bank account which do not generally have these facilities. Some held more than one type of account: Types of Bank/Savings Account Held Current Account 54 Basic Bank Account Savings Account Building Society Account Post Office Card Account Credit Union Banking None of these Base = 1144 tenants 3 4 For those who didn t have an account, the most common reasons were that they either felt they didn t have enough money to put into an account or that they felt they didn t need one. They would be most encouraged to open a bank account if there was someone to help them do it and there was a bank within easy travelling distance. While only a small number have no account of any kind, 57 of tenants said they prefer to use cash to pay for things. The issue is therefore often not so much that our customers are unbanked don t have a bank account but that they are underbanked they have an account but don t use it and will need support in how to use banking services more effectively. 6 7

5 1.2 Banking Services Of our tenants who responded to our survey: 69 make direct debit transactions 53 of tenants hold a debit card 29 use standing orders 26 of tenants use cheques 24 use internet banking 15 of tenants have an overdraft 13 of tenants use telephone banking 13 of tenants use BACS payments. 1.4 Credit Unions 5 of our tenants are members of a Credit Union. While a substantial number of tenants are using mainstream high street providers, very few are using a Credit Union. This means that tenants will be left with fewer alternatives and may have to rely on doorstep lenders who can charge up to 545 APR, payday lenders who can charge up to 4214, or even have to turn to illegal loansharks. 1.5 Debt Advice 17 of tenants have received debt advice in the last six months. This is significant because, as part of Universal Credit, the Department of Work and Pensions (DWP) is planning to introduce direct payments where most recipients will receive all of their benefits direct to themselves rather than paid to their landlord. It will therefore be increasingly important for housing associations to encourage increased use of direct debits (currently at 69 in our survey) to ensure they get a guaranteed payment of rent and tenants avoid falling into rent arrears. 1.3 Saving 27 of respondents have access to a savings account Only 38 of customers save regularly. The main reasons for saving given were: No 83 Yes emergencies 16 a rainy day 14 holiday 13 children 11 household items. The overwhelming reason why tenants don t save is a perception that they can t afford to save (32) or they don t have enough money to save (20). 19 of tenants link their inability to save to their low income. A small minority of tenants never quite get round to it, or can t be bothered to save. And a very small minority admitted that they didn t know how to save. However, with the Government introducing direct payment of benefits through Universal Credit, alongside benefits reform, demand for these services is likely to increase substantially. 1.6 Home Contents Insurance Only 40 of tenants hold home contents insurance. Reasons Why Tenants Don t Save Do not 60 Can t afford to save No money to save Do 40 Income too low 19 Can t be bothered Never quite get round to it Don t know how to I m not organised enough to save Base = 1144 tenants Of those that don t: 47 feel they can t afford it 29 feel that they don t own anything worth insuring. However, in the event of a burglary or fire, tenants could potentially lose everything and can often find it difficult to replace items such as furniture and televisions. Indeed, tenants who prefer to use cash to pay for things are also more likely to keep their savings at home in cash, which are also at risk if they are not insured. 8 9

6 Part 2: Attitudes Towards Money The attitudes within this survey covered thirty aspects of money and life, ranging from tenants reactions to risk, their stress levels, their feelings of personal responsibility, and whether they feel in control of their money. 2.1 Stress and Money 30 of tenants agree that thinking about my finances keeps me awake at night 50 worry about the future 16 of tenants admit to putting off opening their bills. 2.2 Control of Money 61 feel they are very organised when managing their money day to day 41 find it easy to make decisions with finance 17 feel very disorganised. Thinking about my finances keeps me awake at night I am very organised when it comes to managing my day to day finances If I take care of myself now, life will be better in the future I m happy sorting out my finances, I don t need any help Agree Neither Disagree 2.3 Support with Money 24 agree that they don t know where to start when it comes to their finances 48 find it easy to talk to family and/or friends about their finances 34 find it difficult to talk to family and/or friends about money 26 expressed a need for help with finances 23 don t know who they can trust to help them. Don t know where to start when it comes to their finances 24 Find it easy to talk to family and/or friends about their finances 48 Find it difficult to talk to family and/or friends about money Expressed a need for help with finances Don t know who they can trust to help them

7 2.4 Personal Responsibility Our research shows that social housing tenants are prepared to take personal responsibility with their finances: 72 agreed that if I take care of myself now, life will be better in the future 62 think that saving for the future is important and something that I have to do 57 agree that I d like to be able to save but I never seem to have any money to put by. If I take care of myself now, life will be better in the future 72 Saving for the future is important and something that I have to do I d like to be able to save but I never seem to have any money to put by It is clear that tenants are looking at which trusted sources they can turn to for advice and that they would like to take personal responsibility for their future but need support in order to do so. 2.5 Technology 45 do not have access to the internet at home 58 do not have access to the internet through their mobile Only 46 feel confident using technology. No 45 Yes 55 Percentage of tenants with access to the internet at home Base = 1103 tenants In conclusion, Circle tenants are already worried about money before welfare reforms have even begun. However, it is a mistake to say that people on low incomes are not organised when it comes to managing their money. Many feel organised and are prepared to take personal responsibility, but they need assistance to help them to do so. When Universal Credit is introduced, the Government s delivery strategy is mainly digitally-based with payment and advice provided online. But our research shows that nearly half our tenants (45) do not have a connection to the internet in their homes, and even if they are connected more than half (54) do not feel confident using technology. To ensure the success of these changes we believe the Government will need to supplement online solutions with face-to-face advice to ensure that customers, who are not connected or don t feel confident using computers, get the support they need

8 Part 3: Segmentation 3.2 Group 2 Tina s Profile Attitudinal statements were used to develop a segmentation of the Circle tenants. This study revealed that our tenants fit into five different segments: 3.1 Group 1 Rob s Profile This is Rob. He is 35 and in full-time employment He has a current and a savings account. He is a regular internet banking user He is computer literate, has internet access at home and via his iphone 4S Rob manages his everyday finances online and is not struggling to pay bills He takes personal responsibility for his future and is not afraid to take risks Rob saves for emergencies and holidays. Group 2 accounts for 21 of Circle tenants. Key characteristics: This is Tina. She is 26 and unemployed Tina is very disorganised when it comes to managing her money She buys on impulse and regrets it later Tina puts off opening her bills and her finances keep her awake at night. She worries about her future all the time She would like to be able to save, but never seems to have any money to put away She does not know where to start when it comes to finances and welcomes help to sort out this aspect of her life. Group 1 accounts for 30 of Circle tenants. Key characteristics: More likely to be male More likely to be aged and working full time 65 have internet access at home 49 have access via their mobile phone 63 have a current account 39 have a savings account 38 use internet banking 46 hold home contents insurance. Group 1 are computer literate. They take personal responsibility for their future, they are not worried about their finances and they are confident taking risks. They are not struggling to pay their fuel bills, and 55 save regularly, putting money away for emergencies/rainy days, holidays and children. More likely to be aged and have a basic bank account Often buy things on impulse and put off opening bills 37 hold home contents insurance Their finances keep them awake at night and they worry about their future Don t know where to start when it comes to finances. Group 2 would like to be able to save, but never seem to have any money to put away. They realise that saving for their future is important and something they should do. However, only 26 currently save either regularly or occasionally. They are disorganised when it comes to managing their money and consequently 25 have received debt advice in the last six months. Despite their need for support, only 31 of Group 2 would welcome money advice from Circle. Save Regularly or Occasionally Despite their greater use of technology and regular saving, a comparatively high 52 of Group 1 would welcome Circle providing money advice. This shows that often the groups that are in least need of money advice are the most likely to be open to it. All tenants Group Internet Banking All tenants 24 Group

9 3.3 Group 3 Michelle s Profile 3.4 Group 4 Martin s Profile This is Michelle. She is 23, a single mum and unemployed She has a current account and would like to put money by for her daughter, but feels she can t afford to save She has internet access both at home and via her Nokia phone but does not use them for banking Michelle is very organised with her day-to-day money but still struggles to pay her fuel bills. She does not have home contents insurance She worries about the future and often lies awake thinking about her finances. This is Martin. He is 27 and unemployed He does not have a bank account or a debit card and prefers to deal in cash He lives for today and lets tomorrow take care of itself Martin doesn t worry about money because he doesn t have any but struggles to pay his bills He thinks homes contents insurance is a waste of time He s happy the way his life is and doesn t feel he needs debt advice. Group 3 accounts for 18 of Circle tenants. Key characteristics: More likely to be female More likely to be aged between 18 and 54 and not working Likely to hold current or basic bank accounts, but not savings accounts Only 31 have home contents insurance. Despite being organised with day-to-day money, Group 3 struggle to pay their fuel bills. They worry about the future and lay awake thinking about their finances. 29 have received debt advice in the last six months. Only 20 of Group 3 save regularly because they feel they can t afford to save, and that their income is too low. They plan ahead and realise that saving for the future is important and would make them feel good, but they don t know where to start. 43 would welcome money advice from Circle. Received Debt Advice in the Last Six Months All tenants 17 Group 4 accounts for 15 of Circle tenants. Key characteristics: More likely to be male and not working Do not worry about their future but they struggle to pay their bills 52 have access to the internet Only 25 have home contents insurance. Group 4 find making decisions easy and feel they don t worry about money because they don t have any. They would like to be able to save but never have any money to put away. 29 save regularly or occasionally and any saving activity is centred on children. 57 would welcome money advice from Circle but because they are not worried about their finances, Group 4 may need to be given information before they will take any action. Of all of the segments this is the group which is least self-aware, but often most in need, and may require information to make them aware of the need to change behaviour. Hold Home Content Insurance Group 3 29 All tenants 40 Group

10 3.5 Group 5 Ruth s Profile Conclusions Group 4 accounts for 16 of Circle tenants. Key characteristics: This is Ruth. She is 61 and recently retired She has both a current account and a savings account. She uses direct debits, debit cards and often pays with cheques She doesn t use internet banking as she has not got internet access She saves regularly for emergencies, rainy days and holidays She is well organised when it comes to money and finances. She does not take risks and welcomes advice from others about where to put her savings. More likely to be over 65 and retired Likely to have both a current account and a savings account, and use direct debits, debit cards and cheques Unlikely to do internet banking as often do not to have internet access 61 hold contents insurance 37 have a savings account 49 save regularly for emergencies, rainy days and holidays. Group 5 are well organised when it comes to money and finances. They take personal responsibility and realise that if they take care of themselves today, life in the future will be better. They are happy sorting out their own finances and don t take risks. 61 would welcome money advice from Circle, probably around how to maximise their savings. Again the segmentation shows that the groups in the more stable financial position are often most open to advice. Use Cheques All tenants Group At Circle, we are already using this research to inform the delivery of our financial inclusion service to ensure that we continue to help the people who need it the most. In light of the expected increase in demand for advice services that will come with the introduction of Universal Credit, Circle has, over the last 12 months established a number of partnerships with national and regional organisations to provide vital support and advice services to our customers in a way that most appropriately meets their needs. National partners include the Money Advice Service, Entitled To and Step Change Debt Charity whilst more locally we work with a number of third sector organisations including citizens advice bureaus and credit unions. Roddons Money Advice During 2011/12, Roddons, one of our housing association partners, was successful in increasing customers incomes by over 127,000 by supporting applications for Disability Benefits, Housing/Council Tax Benefits and Pension Credits. Mr A (a Roddons customer) had become too ill to work and had slipped into rent arrears of over 1,000. He was referred to the Roddons Money Matters Officer. When the Money Matters Officer visited things had become so bad that he couldn t even afford to put any money in his electricity meter. Mr A s poor literacy skills meant he was struggling to claim the correct benefits and with no money coming in he was slipping further into debt. Roddons helped Mr A claim for child benefit and housing benefit, securing back payments of almost 3,000. A grant was also obtained from Anglian Water through their assistance fund for Mr A s water debts. Mr A is now back at work and his rent arrears stand at just over 100. Recommendations for Government Information Many of our customers are not aware of the changes to welfare which are facing them and how these will affect their finances. If the reforms require a change in behaviour and adaptation to new ways of managing their lives, tenants will need information. We are therefore calling on the Government to ensure that all those who are affected (and those who are not affected) by welfare changes are properly informed through targeted and timely communication. Advice The new Universal credit system will mean that for the first time many tenants will have all their benefits paid to them directly in one monthly sum rather than to their landlord. Many of them will not be used to receiving this amount of money in one go and will require support to help them understand the system and manage their money. Given that 45 do not have access to internet in their homes, online advice solutions will not be sufficient. People are often unsure of where they can go for advice and where they can turn to for support to help them through the transition. Our research and segmentation of customers shows that a one-size-fits-all approach will not be as effective as specific communications. We are therefore keen to work with the Government to provide a guarantee of at least one face-to-face money advice session for each new recipient of direct Universal Credit payments who needs it

11 Circle Housing Group Circle House 1-3 Highbury Station Road London N1 1SE Telephone: Minicom: