Portafina reveal that 83% of Brits do not know what a pension is

A survey by pension specialists Portafina reveals that 83% of Brits do not understand what a pension is and only a third know how much they're paying into their pension pot.

A shocking discovery from pension specialists Portafina claims that 83% of Brits are not fully aware of what a pension is. This statistic is even more concerning considering auto-enrolment pensions are set to rise from 2% to 3%. Understanding what your pension is and how it works is essential in order to keep track of your finances and ensure you do not fall into debt.

The study focuses on the reasons behind why so many Brits aren’t educated on their pensions, with education seemingly playing a large role in the confusion. 

1,500 participants were asked a series of questions regarding money management and pensions to discover what changes need to be made (if any) to better secure our children’s financial futures.

Do we need to improve our education system?

The education system has not undergone any drastic changes for some time, but with Brexit looming and auto-enrolment set to rise, does a stronger focus on these issues need to be introduced to our schools?

Portafina discovered that 56% of the participants agreed that children need to be taught on how to manage their money and learn about the basics of pensions. Following this, 32% believed that having children learn about this would place them in a stronger financial position further down the line. Lastly, 80% wholeheartedly agreed that the education system needs to introduce some sort of finance or money-based education options. The idea being children would have a better idea of how to manage their money and what to do with it in the future. 

Parents join the debate

The study also looked at 1,500 parents as asked them a series of questions revolving around changes to the education system (regarding money management, banking, finance, saving etc).

Here’s what Portafina found:

  • 91% of parents agreed that more should be done to educate their children on general money management skills, saving and budgeting. 
  • 65% wanted more emphasis on handling debt and what to do if they are ever faced with debt. This was closely followed by banking and general investment information. 
  • Pensions came in at 41%, with parents believing a simple introduction on what pensions are and why they’re essential would greatly benefit their financial decisions in the future.
  • Only 3% of parents stated they’d rather not see their children learn these life skills.

No drastic changes to the education system, but something needs to be done

Portafina MD, Jamie Smith-Thompson believes that the education system is fantastic but would benefit even more if more focus was applied to financing for the future, specifically singling out pensions:

"It's worrying that so many people still don't understand what the pension is [...] Part of the pension knowledge problem does point towards a lack of education from a young age [...]". 

"Over half (54%) of 18-24-year olds felt that a lack of education at school has stopped them from taking their pension seriously [...] Although I do appreciate some of the barriers teachers and schools experience with providing lessons on this subject matter, it is something the government needs to address". 

Pensions being dismissed as they are “too far away to prioritise”

Although it may be easy to blame education for the majority of Brits not knowing what a pension is, 46% of Brits did admit that they don’t prioritise their pensions because its’ “too far away [to prioritise]”.

Strangely enough, education comes in at second place regarding the reasons why Brits are somewhat dismissive of their pensions:

  • It's too far away to prioritise (46%) 
  • Lack of education at school (41%) 
  • It's too confusing (32%) 
  • Don't know who to ask (22%) 
  • Too scary to think about (15%) 

A word of wisdom from Sir Steve Webb

With the auto-enrolment percentage set to increase, former pensions minister, Sir Steve Webb believes now is the time to educate Brits on their pensions: 

"more should be done to raise awareness of the option to defer the state pension".

It’s simple, more has to be done to change the way we think about pensions

"Saving for your long-term future can only be a good thing, and the earlier we [children and young adults] get into these habits, the better", claims Smith-Thompson.

Although education definitely needs to place a firmer focus on the importance of pensions and money-management, adults also need to address their pensions early to ensure they stand in good financial stead in the future. 

Statistics are taken from a survey of 2,002 employed UK adults in February 2019 and you can learn more by talking to pension specialists, Portafina.