From the regulator to IFAs, the advice sector is keen to increase UK investor knowledge, but it may have to speed up the process.
Financial planning firm Portafina asked 2,002 adults across the UK to define key terms such as tax-free cash; final salary scheme; personal pension; drawdown; state pension; lifetime allowance; tax relief; pension release; annual allowance and pension contribution.
With the results showing that none of the countries have succeded in educating their entire population about basic finance.
In the survey, Edinburgh (5%), Southampton (5%) and Sheffield (3%) came out on top as the cities with the highest percentage of residents able to identify every pension term.
The biggest knowledge gaps came from those living in Coventry, Belfast, Aberdeen and York, with no respondents from these cities able to answer every question correctly.
Personal pensions
According to the Office for National Statistics, 73% of employees are now paying into a personal pension thanks to the introduction of auto-enrolment.
Worryingly, the survey found 72% of Liverpool residents were unable to correctly define a personal pension, with 25% of those living in the city simply stating that they “don’t know”.
The top five cities where residents are most knowledgeable about personal pensions are:
- Aberdeen (55%);
- Oxford (52%);
- Manchester (50%);
- Bristol (49%); and
- Cardiff (49%).
Pension contributions
When it comes to paying money into a pension, savvy savers in Norwich were the most likely to know about pension contributions (82%).
Southampton (79%) and Leeds (78%) residents were similarly confident that pension contributions can be made by individuals, their employers or another third party.
Those living in Glasgow were the least likely to know what a pension contribution is (57%), with 14% believing this is money paid into a pension solely by the government.
Some 84% of Brits understand that the state pension is a regular payment from the government most people can claim when they reach state pension age.
However, 15% of those in Manchester and Bristol wrongly believe they pay into the state pension themselves.
And one-in-six (16%) Coventry residents think they will only get the state pension if they have no other pension savings.
Notoriously complicated
Jamie Smith-Thompson, managing director at Portafina, said: “A pension is the most powerful savings tool most of us will ever have.
“And with auto-enrolment kick starting retirement saving for millions of people, things are generally looking positive.
“Pensions are notoriously complicated to understand.
“And as the pension industry and the government look to make pensions more accessible with developments such as the pensions dashboard, we need to make sure that we’re helping people across the country to have the basic knowledge and information they need about pensions.
“At the end of the day, you shouldn’t have to learn a new language just to understand your pension options.
“There are plenty of good regulated financial advisers whose job is to make everything as clear as possible for you. So, it’s important to find the right one for you.”
