The Personal Investment Management & Financial Advice Association (PIMFA) has published the results of research it carried out in partnership with The Wisdom Council, and which it claims highlights an “urgent need for consumer pension and savings education.”
The Association, a trade body representing financial advisers and wealth managers, says that the main reason people are saving too little for retirement is that “the consumer pension and savings market still feels alien to them.”
The press release accompanying the release of the study notes that financial education was added to the UK schools’ curriculum in 2014. However, PIMFA adds that, not only is this education confined to people of school age, but also 75% of teachers have reported that financial education has had little or no positive impact as the teachers had not been trained on the subject prior to delivering their teaching (according to a 2016 Money Charity survey).
PIMFA is also concerned about a gender gap, with women showing lower degrees of confidence in their financial knowledge. It adds that a recent Guardian article claimed that the average single woman receives £85 per week less in retirement income than the average single man.
The PIMFA and Wisdom Council study surveyed around 2,000 individuals. Almost two fifths (39%) of respondents said that the principal source of their retirement funding would be the equity in their house. Despite all the pressures preventing people from putting aside sums for retirement, more than 60% anticipated retiring before they reached age 70.
PIMFA was concerned by the lack of knowledge of some respondents from the millennial generation. Approximately 40% of respondents from this age group believe that their pension provision includes benefits from a final salary scheme, but the Office for National Statistics suggests the true figure is closer to 20%.
The survey also comments on “a lack of understanding of the benefits” of auto-enrolment schemes and says that this is a reason why people may choose to opt out of their workplace pension.
Across all age groups, there was evidence amongst respondents of being unwilling to make pension provision in the usual way due to a lack of trust in the financial services industry. Millennials are still wary of the financial system following the crisis of a decade ago, and also see financial advisers as “expensive and motivated by the desire to make money first and foremost.” Generation X still clearly remember the pensions mis-selling scandal of the 1990s.
PIMFA CEO, Liz Field, said:
“For a large proportion of respondents the main methods of saving for retirement remains in an over reliance on their house and holding cash. Risk aversion remains an issue with few individuals balancing this equation by taking calculated risks to grow their pot.
“Engaging and relevant education is key to helping consumers see the wider picture and how investment and financial advice can benefit them when planning their personal financial futures – there is a lot of work still needed to change these basic views”.
Anna Lane, CEO of The Wisdom Council, said:
“We see growing differences in life stages between generations and shifts in retirement patterns. The ‘grey glide’ is the new reality – have manufacturers caught up with the need to refresh and innovate to allow that flexibility? We think there is more to do on that score and our study raises some of those questions.
“Ultimately, customers want clarity, simple products that flex with them and communication that speaks to them as human beings. Perhaps digital delivery, machine learning, behavioural science and creative product innovation could be the perfect storm that finally makes long-term saving not only accessible but exciting”
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