Welcome to our first post of a series where we will be delving deeper into pension education – what it means, where we can access it and how we can improve it.
What is pension literacy?
To start, it’s important to understand what it means to be overall pension literate. Pension literacy is the ability to understand essential pension concepts in making informed decisions about saving, and investing for retirement. Therefore, an individual who is pension literate would be able to understand essential pension concepts and be able to make informed decisions about their pension and retirement.
The UK Outlook
According to AON’s 2021 pension survey, less than three in ten people say that they expect to retire at the standard retirement age. Moreover, another research found that 35% of people (18.4 million Brits), either have no pension at all or are unaware that they have one. This means that many individuals are not pension literate.
Employees just aren’t saving enough to fund their pensions. Although auto-enrolment has helped with the number of people saving into a pension, there is a general agreement that the standard 8% contribution rate is not enough for an adequate retirement income. Almost half 22-29 working adults will not live above the poverty line in retirement from their current patterns of saving (Scottish Widows), and 1 in 6 over-55’s don’t even own a pension pot at all. If things keep going the way they are, there will be an estimated £350 billion savings gap in the UK by 2050.
With the average UK employee to go through 11 employers in their lifetime, this combination of job churn and five to eight million new pension savers has led the government to assume an excess of 4.7 million small pension pots by 2050. In fact, according to research, there are over £19 billion in unclaimed pensions in the UK.
Why is pension education important?
Being pension illiterate can affect anyone, regardless of age, background or job title. It can affect those who are wealthy just as much as those whose resources are stretched. But it’s never too late to learn for anyone and it seems people in the UK need more help than ever to improve their pension wellbeing.
Even in 2021, the figures regarding people’s pensions are eye-watering. According to different sources:
- Five million people approaching retirement are at risk of not having adequate pension income
- A single pensioner would need a pension income of £10,200 to live a “minimum level” lifestyle in retirement.
- Almost half (46%) of 18-24-year-olds don’t know their state pension age
These findings show that there is an urgent need to educate people about how to handle their pensions. The basic foundation of knowledge includes, understanding how much current pots amount to and how much to contribute so that they can retire comfortably.
Having a solid understanding of pensions will empower people to make the right decisions and help them ultimately achieve their dream retirement goals.
How to improve your employees pension education
Getting started can be challenging but it is never too late for someone to learn how to put their pension in order. Whether people want to uncover lost pension pots from previous employers, up their pension contributions or learn how to get the most out of their pension, the information is out there and readily available. If people need more guidance concerning their pensions, there are unbiased online education platforms such as Mintago to provide them with the right tools and talk them through the steps required to give them peace of mind and control over their pensions.
Here are five quick steps your staff can take to become pension literate:
- Maximise pension contributions as much as possible
- Prioritise paying into their pension now instead of putting it off
- Check in regularly with their pension to keep track of goals and achievements
- Create a diverse pension plan and do their research about products and services that can help optimise their pension
- Make use of pension education platforms such as Mintago to enhance their pension knowledge