Context:

The Money Advice Service (MAS) plays a key strategic role in both financial capability and debt advice. It is the statutory body for financial capability and co-ordinates the UK Financial Capability Strategy. It is also the largest single funder of debt advice in the UK and has a statutory remit to improve the availability, quality and consistency of debt advice.

The potential for a more joined-up approach in the delivery of debt advice and financial capability is a key priority for MAS. As such, blending financial capability and debt advice was made one of 6 key areas of focus in the Debt Commissioning Strategy that MAS launched in 2017.

Individual Voluntary Arrangement (IVA)2 provider Aperture IVA began a programme of work to better understand the specific financial capability needs of their client base and test out new ways of working – inviting MAS to participate in the study.

The overarching aims of the project were to a) identify and understand the specific financial capability needs of debt advice clients, how these evolve through their debt advice journey and/or differ between client groups; b) start to quantify the degree to which financial capability interventions aimed at meeting these needs might amplify successful outcomes for debt advice clients; and c) understand the degree to which such interventions synergise (or not) with the existing debt advice/debt solution journey.

The study:

The formative work undertaken by Aperture explored budgeting issues faced by clients as they enter an IVA, highlighting how the destructive money behaviours that develop during the journey into problem debt can persist following set up of a debt solution.

The study also showed that a light-touch financial capability intervention to encourage clients to adopt a forward planning approach to budgeting, has the potential to significantly improve their ability to make expected monthly IVA payments.

The evaluation was deliberately kept small to offer an initial indication as to whether the intervention showed promise before committing to a more in-depth study. Clients were allocated to one of two populations; a pilot group who received budgeting advice and a copy of the budget summary delivered by an adviser who had been trained on pilot processes, and a control group who followed ‘business as usual’ (BAU) processes and were dealt with by an adviser who had not received training on the pilot intervention. A total of 114 clients were allocated to the pilot group and 670 to the BAU group.

Clients were monitored and overall performance between the pilot and BAU group was then compared; demographic data was monitored. Aperture IVA supplied collated performance data for the 12 months following the clients’ initial IVA approval, including data on missed payments and customer service data.

Key findings:

• Scores were measured using the General Sense of Self-Efficacy Scale. 105 (82%) of young people completed both before and after surveys. Scores increased for most participants. The average increase was 12%.
• Pilot clients consistently made more on-time monthly payments over the 12-month study period than BAU clients. Over the cumulative 12-month period, pilot clients paid 90% of all payments on time (1231 of 1375 payments due), compared to 81% of payments (5909 of 7260 payment due) owed by clients who had not received the intervention.
• pilot clients were 43% less likely to contact Aperture IVA regarding matters relating to their budget.
• Pilot clients had a greater understanding of their budget.
• The 43% reduction in budget-related queries together with the 11% uplift in on-time payments observed within the pilot group indicates that this intervention shows promise.
• The pilot did result in a reduction in IVA arrears which is likely to have resulted in a reduction of arrears processing time for Aperture IVA. Until processes are optimised, it is impossible to calculate any overall time saving.

Points to consider:

• The evaluation is based solely on one data source. Care should be taken in any inferences made.
• Some of the differences observed between the two groups could be attributed to adviser skill rather than the budgeting advice and budget summary clients received.
• The evaluation only considers one intervention and does not offer a comparison of effectiveness across multiple intervention formats.

• The evaluation is relevant to studies of debt advice service effectiveness and the impact of interventions to help people who are in debt, including the provision of clear budgeting information.

• The study is transferable, with the caveat that it is a small project with methodological limitations.