Friday 14th June 2024

Could financial education fix the pensions crisis?

Teaching children about money and why they need to think about long-term saving could be the key to unlocking the current crisis of underfunded pensions in the UK

This week on the Mouthy Money podcast we were very pleased to have Sarah Marks, chief executive of RedSTART Educate returning to talk about the financial education charity’s first year of results in their multi-year study of the effects of financial education in schools.

During our chat Sarah raised an extraordinary idea – that financial education (and the current lack of it) could be the reason why we’re facing a major pensions crisis.

So what is this crisis we speak of? Our recent Money Matters Index data found that pensions savings are at woeful levels, leaving many facing longer years of work and less security in retirement.

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But Sarah posited an intriguing reason as to why pension savings might be struggling so much – no one actually realises how much they’re going to get, and everyone thinks they’re going to get a guaranteed income.

Essentially – the era of final salary or defined benefit pensions is largely over. But the way in which we educate people about how pensions work has yet to catch up.

Fundamental changes – primarily from Government – need to be made to ensure that everyone, be they kids or adults, understands that today’s pensions are the sum of what you put into them now and for the foreseeable future.

What makes this all the more worrying is that we face an increase in the numbers of people taking their money out of pensions or giving up on valuable contributions in order to pay their bills today.

The whole situation, when couple with the slow death of the State Pension, is a deeply troubling set of events.

Have a listen to my chat with Sarah for more about this, plus the other findings from RedSTART’s research.

For the full episode: Spotify and Apple Podcast.

Photo credits: Pexels

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