Young people know all too little about how a pension works. A report I wrote in 2012 for City think-tank the CSFI, Generation Y: the (Modern) world of personal finance found a lack of basic pension knowledge amongst young people aged 18-25. In fact, one of the key findings was that more than 40% of those paying into a pension scheme weren’t even sure what type it was.
Even if they did have some knowledge of pensions, they seemed reluctant to contribute to one: many felt that pensions were inflexible, confusing, and faced an uncertain future. Final salary schemes have all but disappeared for new workers, while many inflation-linked pension schemes are vulnerable to changes to the index on which they are based. It seems that other age groups fare little better: the DWP’s recent report Attitudes to Pensions found that only 6% of those in the general population felt they had a good knowledge of pensions, while 28% of women admitted to feeling scared about dealing with pensions. Many of those questioned were even uncertain about what their State Pension age entitlement was.
There is a need for better financial training from an early age to promote confidence, and a need for simpler, more certain, pension products, that will be worthwhile for young people to contribute to into the future.
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