Understanding the long-term impact of debt advice
Knowing what works in solving problem debt is vital. The completion of a two-year quantitative pilot longitudinal study (PLS) by the Money and Pensions Service (MaPS) marks the first steps towards developing a longitudinal study to build an in-depth understanding of the medium and long-term impacts that debt advice can have.
A study of this kind has rarely, if ever, been attempted either nationally or internationally. Our pilot has the largest longitudinal dataset so far gathered on debt advice in the UK.
The key conclusion for the pilot is that a large-scale longitudinal study of debt advice is feasible, important and timely. The pilot demonstrates solid evidence that such a study is likely to produce valuable insight.
Why large-scale longitudinal studies are important
A large-scale study will allow us to measure how effective debt advice is in achieving the best outcomes for clients, including building financial resilience to avoid returning to problem debt.
It will also provide insights to inform MaPS’ future commissioning exercises and the design of effective solutions. This is particularly the case for those for whom debt advice has a lesser impact – for example households with deficit budgets – and people who are reluctant to engage with debt advice.
To improve understanding before considering a large-scale study, we designed, implemented and evaluated this PLS. The PLS ran over more than two years, from October 2016 – January 2019.
To better improve recommendations, the approach was to test different methods of recruitment and contacting participants.
From our online and face-to-face recruitment survey (46,092 people), we identified a sample of 1,929 eligible people in the UK facing debt problems. These respondents were systematically stratified and randomly allocated to either the control or treatment group. The latter group received encouragement to contact a debt advice service.
We tracked the outcomes of both groups across two further interview waves.
Feasibility and lessons learned for a large-scale study:
- Eligibility, participation and attrition rates demonstrate that understanding longer term debt advice outcomes is possible
- Retention rates do not challenge the feasibility of a large-scale longitudinal study keeping the treatment and control comparable
- A range of valuable outputs can be measured at different points in time
- Encouragement to seek help with debt increases the likelihood of people asking for help from friends and family
- Self-help is the main choice made by those encouraged to seek help with debt
The main challenge is still how best to encourage participants reluctant to seek formal debt advice to ask for this type of help.
How we can look at outcomes using our pilot data
Findings should be seen as starting points for further research; the primary objective of the PLS was to test the feasibility of a large-scale longitudinal study.
Customers and their behaviours
On the effects of receiving encouragement to seek help, our pilot evidence suggests informal help, such as from friends and family, does not tackle the root causes of an individual’s debt. This is despite respondents reporting a greater feeling of wellbeing. There is clearly a sense of relief, even though effective strategies to tackle debt are not adopted.
This is of particular interest for policymakers and service designers to prevent people from taking a less optimal route to solve their debt problem when formal debt advice is available.
As the encouragement did not significantly increase the probability of seeking formal debt advice, we cannot use the randomised encouragement design to assess the effects of receiving formal advice. However, we can still use our PLS to compare the outcomes at the second wave.
Descriptive evidence on the role of formal debt advice suggests people who seek it tend to be facing the greatest level of financial difficulty, with formal advice likely to mitigate and possibly counteract these difficulties.
Further learnings and recommendations on ways to improve the longitudinal study and enhance effectiveness are included in the reports below.
Download the Executive report
Debt advice: Evaluating the long-term outcomes.
The Executive report summarises in further detail our approach and its implications for a full study, as well as key findings and recommendations.
For a more detailed analysis, please see the main report below.
Download the main report
Debt advice: Evaluating the long-term outcomes.
The main report contains a comprehensive summary of the pilot longitudinal study of debt advice.
The report consists of detailed methodological results and data analysis on debt advice outcomes, the design and implementation of the study, behavioural elements and communication templates. It also includes recommendations for the design of a large-scale study and how elements can be improved, alongside operational pointers.
Evaluating the long-term role of debt advice on people’s financial behaviour and capability, levels of indebtedness and general wellbeing is challenging. The results of the PLS provide a strong case that a large-scale longitudinal study will offer robust evidence to inform better service design and long-term outcomes for people in problem debt.
We will therefore invite the debt advice sector – and the wide range of organisations that benefit from this sector’s work – to contribute their thoughts and collaborate to ensure the large-scale, longitudinal study happens and is undertaken as effectively as possible. MaPS will lead on this, and we look forward to engaging with individuals and organisations in the coming months.
Five reports are available in full covering our PLS design, implementation and evaluation, and analysis of our pilot data on debt advice outcomes.
Debt advice: A scoping study for measuring outcomes (April 2016)
A targeted literature review for MAS (now MaPS) by the Personal Finance Research Centre, University of Bristol. The report explores options and recommendations for the most optimal research methodology, and a timeframe for a longitudinal evaluation of debt advice outcomes. It includes the limited current evidence on outcomes at the time of publication.
Longitudinal study of debt advice, Wave 1 technical report (May 2021)
A report commissioned by MAS (now MaPS) from Kantar Public research agency on the development stage to test the PLS and survey instruments, and develop key design parameters. The report covers first wave of fieldwork (September 2016 – February 2017) and the randomised experimental allocation. It includes detailed information on the design and implementation of our encouragement intervention, as well as an early review of it.
Methodological lessons from the pilot longitudinal survey on debt advice (April 2021)
A report commissioned by MAS (now MaPS) from the Institute for Social and Economic Research (ISER), University of Essex, and the London School of Economics and Political Science. The paper addresses key methodological questions, including on our PLS design, sample sizes and eligibility, attrition and response rates.
Investigating the role of debt advice on borrowers’ well-being. An encouragement study on a new sample of over-indebted people in Britain (October 2021)
A paper commissioned by MaPS from ISER, University of Essex. Analysing our pilot data, this research looks at the impact of our encouragement intervention. It adds to the shortage of understanding on the outcomes of seeking debt advice.
The effect of formal debt advice: insights from a new longitudinal study in Britain (October 2021)
A paper commissioned by MaPS from ISER, University of Essex. Using our PLS data, it explores how formal debt advice can help people with their financial situation, capabilities and wellbeing.