Mixed picture on the state of our finances

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Regulator the Financial Conduct Authority (FCA) unveiled its Financial Lives Survey 2024 last month, including a vast amount of data covering such areas as levels of cash savings, debt management, financial resilience, and access to banking services.

The survey found that the amount of “unbanked” people in Scotland had fallen from 3 per cent in 2022 to2 per cent of the population last year. But this was still higher than for the UK as a whole, where the figure for 2024 was 1.6 per cent. This statistic refers to those with no current account with a bank, building society, credit union, or e-money provider.

FCA chief operating officer Emily Sheppard, pictured, says: “If you don’t have a bank account, it’s very hard to get income and to pay bills, and the knock-on effect is substantial.

“There can be a number of underlying reasons for people not having a bank account, for example, it can be linked to homelessness.”

Emily believes it would be good to tackle this problem at an early age, from 18 to 24 years, to ensure people get off on a sound footing. She adds that it is never too early for financial education.

“We’re pushing the whole financial inclusion piece, working a lot with government, firms and stakeholders,” she says. “We’re also working with government to develop a national plan for financial inclusion.”

Tackling financial exclusion was a key feature of the sector growth strategy launched by Scottish Finance Enterprise (SFE) in October 2023, which included a particular focus on reducing the proportion of the population with no bank account.

SFE says the latest figures pointing to progress against that goal were recently discussed by leaders from the FCA, industry, charities, and consumer groups in Edinburgh. Attendees considered the potential for further collaboration to make a real difference.

Sandy Begbie, SFE chief executive, says: “The lack of a bank account puts people at a distinct disadvantage in today’s society, making it harder to receive benefits, secure housing, or get a job.

“That’s why, when we launched our sector growth strategy, we made clear that tackling this form of financial exclusion was a priority for our industry – one with potential to make a meaningful difference to the lives of people. Through our work with regulators, charities and the banks themselves, we want to connect more people to the banking system.

“These figures show that, while there is still a long way to go, progress is being made and our forthcoming pilot in schools could make further inroads into this complex but important issue, as well as building support around financial literacy.

“As an industry, we are determined to ensure that everyone in Scotland feels the benefits of having a strong financial sector, and providing greater access to the financial system is a key part of this plan.”

Sharon MacPherson from Financial Inclusion for Scotland (FIFS) says: “It is about more than just access to financial services, it’s about ensuring that every person in Scotland can participate fully in society without fear of financial hardship or exclusion. But we recognise this cannot be achieved in isolation and are pleased to be working in partnership with Scotland’s financial services industry, charities, regulators, and the Scottish Government to help drive progress. Financial Inclusion for Scotland brings together these partners to align efforts, share insights and advocate for systemic change that supports people across all communities.”

As part of its inclusion strategy, FIFS is planning a School Banking Pilot Project, enhancing banking inclusion and improving access to bank accounts for pupils.

A worrying statistic in the FCA’s survey is that one in ten UK citizens have no cash savings, and another 21 per cent have less than £1,000 to draw on in an emergency

.The regulator’s research also shows that one in four people in the UK have low financial resilience, meaning that they have missed payments, are struggling to keep up with commitments, or don’t have savings to help them through difficulties.

In Scotland, 23 per cent of people have low financial resilience – small savings, a heavy burden of domestic bills/credit commitments, or financial difficulties – down from 26 per cent in 2022.Some 12 per cent of Scots found it burdensome to keep up with domestic bills and/or credit commitments, an improvement from 14 per cent in 2022.

Almost a quarter in Scotland were in the precarious position of not being able to cover their living expenses for more than a month without having to borrow money or ask for help from friends and family.

And 49 per cent of people north of the Border showed signs of vulnerability, such as low resilience, low capability, poor health, or having experienced a negative life event in the last 12 months.

Emily Sheppard says: “It is a very large survey, so you would expect some mixed results. The fact you have one in ten people in the UK with no cash savings, and a further 21 per cent with less than £1,000 is obviously somewhat concerning.

“If you are in difficulty, the best thing to do is to reach out. There are some really good free services around –like MoneyHelper [a UK Government-backed online resource].”

And the FCA found that when consumers do seek support it eases financial pressures. Its survey showed that of the 1.7 million people in the UK who had used a debt advice or debt management service in the previous 12 months, 61 per cent considered that their debts were more manageable as a result.

On a positive note, a reduction in digital exclusion was identified in the survey. The proportion of UK citizens who struggle with online engagement declined from 14 per cent in 2022 to 2 per cent in 2024, and in Scotland it fell from 15 per cent to 2 per cent.

The FCA defines adults as being digitally excluded if they never/very rarely use the internet, or use the internet occasionally (less than once a week), but rate their ability to use it as poor or bad.

Reasons for the drop in digital exclusion include the Covid-19 pandemic accelerating digital adoption across many sectors, including financial services. Additionally, ongoing improvements in digital banking – such as more user-friendly mobile apps and broader internet access – have likely played a beneficial role.

According to the FCA, even those who are better off could take steps to improve their long-term financial health. Some 61 per cent of UK citizens with more than £10,000 in investable assets held at least three-quarters of these assets in cash, rather than investments.

The regulator wants to see more people holding mainstream investments to improve long-term returns.

Emily notes that moving from cash to investments can be dependent on financial education, saying: “Part of our strategy is about building trust in financial services, and getting people to move into investments is an element of that. We’ve a campaign that’s going to be running called InvestSmart, to help consumers make better, informed decisions.

“We also have the reforming of the advice and guidance framework to make it clearer when people can give and receive advice – particularly in those moments that really matter, like when you come into money or hit 55. Getting those who can afford it to invest is part of what we do.

“One of the themes of our strategy is helping consumers to make most of their financial lives, and underpinning that is consumer duty. It’s about making sure firms explain their products in a language that people can understand.”

Looking at retirement, the FCA’s survey found that one-third of UK adults with a defined contribution pension have less than £10,000 saved.

Oliver Morley, chief executive at the Money and Pensions Service, which runs the MoneyHelper service, says: “I’d encourage anyone who is worried about their money or pensions to visit www.moneyhelper.org.uk and join the millions of people who have been supported.”