- Money and Pensions Service predicts UK need for debt help will increase 60% by the end of 2021
- People urged to take action as soon as possible, to avoid debt problems in the future
An additional £37.8 million to fund the provision of debt advice and other support for people suffering money difficulties in the wake of the coronavirus outbreak has been secured by the Money and Pensions Service (MaPS).
Early analysis by MaPS predicts the number of people needing help with debt will climb for at least the next 18 months – increasing by over 60% and peaking around the end of 2021*.
The funding will be managed by MaPS which has committed to the following:
- Ensuring 1 million additional people in England get debt advice over the next 12-18 months
- Delivering enhanced money guidance for a further 2 million across the UK, to offer an earlier intervention for people affected by the coronavirus outbreak and to reduce the number who go on to need full debt advice
- Advancing projects to maximise the capacity of existing debt advice and help as many people as possible, such as the Pilot of Adviser Capacity and Efficiency.
MaPS will set out the process for allocating funds in the coming weeks.
The extra money is in addition to the existing MaPS budget for debt advice in 2020/21 of £64.6 million and will come from a combination of government funds, reallocated MaPS budget and an industry levy. MaPS is also working with the FCA to establish a fairer and more sustainable debt advice funding approach for the future.
In addition to the £37.8 million being announced by HM Treasury today, £5.9 million is also being allocated to Northern Ireland, Scotland and Wales because debt advice is a devolved matter.
Caroline Siarkiewicz, Chief Executive at the Money and Pensions Service, said:
“This pandemic is first and foremost a health emergency, but for many the longest lasting impact will be a financial one. Experience and evidence tell us that the number of people needing formal debt advice in the wake of a major event like this increases slowly at first but is then likely to grow for many months. When the greatest demand for debt advice hits, potentially in 18 months’ time, we need to be ready and that means acting now.
“Debt services are already over-subscribed so we’ll be working hard to help people early, before their financial situation gets too bad. We already have projects under way to help deliver debt advice differently, making better use of data and helping people find the advice that is available more efficiently. For people facing money struggles it’s important they know we are by their side to help them through – not just now, but for the many months to come.”
Coronavirus and debt: what should people do?
There is already help available for people facing financial difficulty in the wake of coronavirus. Here are some initial steps to take:
- Do an emergency budget. It’s important to have a full picture of what you’re spending and what income you’ve got coming in. We have a budget planner tool to take you through this.
- Talk to your creditors if you might miss payments. Many firms are making allowances or adapting repayment schedules to help people manage their cash flows but it’s important to warn them in advance that you need this help. Get more detail on managing loans and credit card repayments from our website.
- Be careful about borrowing. If you have emergency savings, this is the time to use them. If you do need to borrow, try friends and family first. Be wary of high-cost credit and make sure you understand how much you could end up repaying in total. We can take you through some of the other options for borrowing money.
Caroline Siarkiewicz added:
“At a time of great stress for many, the additional impact on people’s financial wellbeing will be a difficult blow to take. The most important thing is that people avoid the temptation to ignore money problems. Whatever your circumstances, this is the time to check up on your household budget, use our money guidance tools to keep yourself on track, and seek help as soon as possible if you think you aren’t going to be able to meet your commitments.”
If you are struggling with debt, there are free services available to help you with options such as debt restructuring and repayment plans. You can find help using our debt advice locator tool.
The Money Advice Service website has detailed guidance on all aspects of coronavirus and your money online.
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Notes to editors
For media enquiries contact:
MaPS Press Office 020 8132 5284 / media@maps.org.uk
Sarah Cordey, Senior Communications Manager 020 8132 5251 / sarah.cordey@maps.org.uk
Mia Cochrane, Senior Press Officer 020 8132 4937 / mia.cochrane@maps.org.uk
- The forecast of Covid-19 impact on debt advice need was modelled in early April 2020, with assumptions based on policy at that time.
- *Debt advice need was modelled using macro-economic variable (unemployment, personal insolvencies) trends based on the period 2007-2011 along with MaPS-held insight into historic debt advice need. Before the crisis, MaPS estimated that just over 5 million people in the UK needed debt advice due to regularly missing payments. Our modelling suggests that, factoring in the impact of Covid-19, this will increase to around 8 million people over the next 18 months, peaking around the end of 2021.
- MaPS set a goal in the UK Strategy for Financial Wellbeing (published January 2020) of making debt advice available to an additional 2 million people each year by 2030 across the whole UK.
- Before the crisis, MaPS estimated that 5.3 million people in the UK needed debt advice due to regularly missing payments but that only 1.7 million of these had received it. MaPS set a goal in the UK Strategy for Financial Wellbeing (published January 2020) of making debt advice available to an additional 2 million people each year by 2030 across the whole UK.
- Money and Pensions Service data shows nearly two-thirds (64%) of people with outstanding payments have reduced or cleared their debts within three to six months of seeking advice (source: 2016 outcome evaluation of debt advice funded by Money Advice Service (2017)).
- When the Covid-19 outbreak began, MaPS established a taskforce with three main functions: to identify and take forward action to protect the delivery of debt advice in the short term, including enabling more debt advisers to work remotely; to develop plans to anticipate demand and increase debt advice capacity and the collective ability to respond to people’s money worries in coming months; to consider the longer-term context for the debt advice and creditor sectors, including potential policy changes. Taskforce members include representatives from Citizens Advice, StepChange, the Money Advice Trust, the Financial Conduct Authority and trade body UK Finance. They were subsequently joined by representatives from the devolved governments.
- Debt advice is an FCA-regulated service offering personalised repayment plans and help with restructuring debts; money guidance offers more generic support and information about dealing with debt as well as tips on budgeting, saving and income maximisation.
- PACE: Our Pilot of Adviser Capacity and Efficiency project is entering a six month phase, using technology to connect customers from several different creditor organisations, such as local authorities and financial services firms, with a virtual contact centre to put them straight through to a debt adviser at one of three different organisations, increasing efficiency and reducing delay. It will also utilise Open Banking technology and Credit Reference Agency data to increase speed and accuracy in serving people.
About the Money and Pensions Service
The Money and Pensions Service (MaPS) vision is: ‘everyone making the most of their money and pensions.’
MaPS is an arm’s-length body sponsored by the Department for Work and Pensions (DWP), and it has a joint commitment to provide access to the information and guidance people across the UK need, to make effective financial decisions over their lifetime. The organisation also engages with HM Treasury on policy matters relating to financial capability and debt advice.
MaPS brings together the free services previously delivered by the Money Advice Service, The Pensions Advisory Service and Pension Wise. MaPS offers customers guidance and appointments over the telephone, online and in person.
MaPS is the largest single funder of free debt advice in England and also works alongside partners across the UK to make debt advice easier and quicker to access, and to improve standards and quality across the sector. Debt advice is a devolved function in Northern Ireland, Scotland and Wales.
For further information visit the Money and Pensions Service website www.moneyandpensionsservice.org.uk
Consumers
can continue to access free guidance about their money and pensions via the
following websites and help lines:
www.moneyadviceservice.org.uk / 0800 138 7777
www.pensionsadvisoryservice.org.uk / 0800 011 3797 www.pensionwise.gov.uk/en / 0800 138 3944