NEWS COPY
Clueless Brits are missing out on millions of pounds – because they can’t grasp basic financial jargon, new research reveals.
Almost half of the adult population don’t know what the term ISA (Individual Savings Account) stands for, according to a study by online investment manager Nutmeg.
And six out of ten are baffled about how much cash they can put into an ISA, tax free, each year.
Five in 10 people have no idea what the current Bank of England interest rate is, while a fifth don’t know that APR means Annual Percentage Rate.
It also emerged that 52 per cent of those polled mistakenly thought you can get a pension in one lump sum.
The study also found common financial jargon such as ‘asset management’, ‘equities’ and ‘offshoring’ leave the majority of Brits confused.
Katie Prentke English, Commercial Director at Nutmeg, said: “There are millions of people who are not benefitting from key products and opportunities because they are uninformed about basic financial terms.
“And rather than seeking advice to find out what this jargon means, people are missing out on the chance to make the most of their money.
“There are so many ways of making money go a little further, such as saving, investing, and maximising mortgages, but so few people know about them.”
The survey of 2,000 adults shows eight in 10 aren’t clear about what a government-backed Child Trust Fund is or how to apply for one to be opened.
When it comes to mortgages, 38 per cent don’t know a tracker mortgage is one which follows the rise and fall of interest rates.
While jargon such as ‘VaR’ (value at risk), ‘AMC’ (asset management company) and ‘AER’ (annual equivalent rate) leave people muddled.
Other financial phrases sure to leave Brits scratching their heads are ‘annuity’, ‘capital gains tax’, ‘endowment policy’ and ‘dividend’.
Two thirds of people polled feel they could be losing out on cash because they don’t fully understand many financial terms.
And 74 per cent say they feel completely bamboozled when talking to financial experts – as a consequence, if they didn’t understand what was being said to them a quarter wouldn’t ask anyone to explain.
While a further 52 per cent of people also never read the small print on financial documents which require their signature.
In addition to a lack of understanding, many Brits feel stuck in a rut with their finances – with the average person having banked in the same place for more than 17 years.
Four in 10 people have NEVER changed the banking products and financial services they are using, as they can’t be bothered to decipher what could be open to them.
Katie Prentke English, from Nutmeg added: “This study clearly illustrates the need for the industry as a whole to make financial products and services more accessible to everyone.
“This means simplifying the language, and having more ways to explain what the options are.
“We believe more and more people would be open to investing their money if they understood the benefits and that the process could be a simple one. Similarly, people would be receptive to moving money around if they knew they would benefit.”
FINANCIAL JARGON BAFFLING BRITS:
1. VaR
2. AMC
3. AER
4. IFA
5. Offshoring
6. Asset management
7. Equities
8. FSA
9. Annuity
10. Capital Gains Tax
11. Endowment Policy
12. Child Trust Fund
13. Dividend
14. Profit margin
15. Inheritance tax
16. Stock market
17. Bank of England interest rate
18. ISA
19. APR
20. Tax code
ENDS