According to a new study released today by A.T. Kearney, the global management consultancy in accordance with YouGov, the UK pensions crisis is far worse than was first thought- and financial education, or lack of it, may be to blame.
A quarter of people on a salary of up to £39,999 a year surveyed by A.T. Kearney were unsure whether they currently have any pension arrangements in place.
This problem does not seem to be confined to this mid range salarybracket, as 29% of those earning over £100,000 a year also do not know whether they are still contributing to their pension or even if they have one.
The situation is particularly acute for women, 49% of women are unsure if they have any pension savings at all.
Neil Dennington, a principal at A.T. Kearney says:
“Everyday we see so many lurid headlines about the financial industry in the press, yet it appears that these shock tactics are simply not working. Significant percentages of the people we spoke to weren’t even aware of whether they had a pension or not.
"People, of all ages, are really only thinking about the ‘here and now’ in terms of their finances and seem unable or unwilling to plan financially for the future.”
Dennington continues:
“The Government and the FSA’s focusappear to be much more on policing cases of mis-selling, than addressing the much bigger issue that the great majority of the population are undereducated about their finances.”
“Financial education has to start early on and the industry has introduced a new 16+ qualification - The National Securities & Investment Certificate.
“It is hoped that many state schools will offer this course in the future andthis will provide students at a young age with an understanding of financial services and products.
"Through a better understanding of finance, people will hopefully be able to make more informed choices about financial matters, especially about the need to save for the future and put money into a pension.”
A.T. Kearney’s study reveals that changes by the FSA in its Retail Distribution Review will further exacerbate this issue, with IFAs moving further upmarket to find affluent clients with large capital bases.
As a result there will be huge over-servicing of the top end of the market, with those people on lower wages unable to understand how best to control their finances or when to sort out their pension.The industry has proved it is unable to help the mass market save money and accumulate wealth, particularly in their old age.
Neil Dennington says:
“Our work reveals that the pension participation rate across the working age population is lower than official Government numbers suggest.
"Recent DWP analysis showed that 38% of working-age people are saving into a private pension, we believe the figure to be lower at 36%. This means the decline in pension saving is even more pronounced than thought which will have a profound impact over the long term for Government and citizens alike.”
