It’s never too early to talk about pensions

By David Penney

We all have our memories from our school days.

A favourite teacher, the pain of cross country in the snow, the coagulated custard for school dinners, covering your maths textbook in pictures of Pink Floyd – to name but a few. 

One thing however you are unlikely to remember is ever talking about money - and I think I can say with some certainty that the word pension was not a word you are likely to have heard in the classroom.

The reality is that financial education has never been a priority in the UK and despite some improvements in recent years, its provision remains limited at best.

Even though the Money Advice Service, a Government-backed agency, claims that most children’s financial habits are formed by the age of seven, there remains no requirement to teach primary school children the basics of money management and secondary school children fair little better.

There is an increasing body of evidence to suggest that it really does matter. 

Academically, financial education can improve maths performance in key stage one and two as it provides children with a context when solving problems.

More importantly however, evidence from the United States shows that those states that include financial education in their curriculum have higher rates of saving which one has to assume will lead to high levels of financial security in adulthood.

It is an issue that was brought into sharp focus earlier this month during Pensions Awareness Week when we were reminded that while we may not be heading towards the pension timebomb once predicted, there are still many millions of people who are not properly considering how they will be supported in their retirement.

I say the timebomb is no longer ticking – well certainly not as loudly – as the introduction of auto-enrolment has brought an extra nine and half million savers into pension schemes so things are undoubtedly heading in the right direction.

However, this only tells half the story as low contribution rates, passive involvement and limited understanding of the opportunity provided by pensions means that balanced with increased life expectancy, the amount in your average defined contribution pension schemes is likely to fall some way short of providing that financial security that we all crave in later life. 

More worrying still is that according to a recent survey by Unbiased, one in six Britons over the age of 55 still have no private pension provision at all and that rises to more than a fifth when looking at the entire working age population.

In fact, despite being part of the auto-enrolment generation, nearly a quarter of adults under 35 have no pension savings at all. 

The plain fact is that as a society we just don’t do enough, early enough, to emphasise not just how important a pension is for long term financial well-being but what a fantastic opportunity they are for all.

In a world where everywhere we turn, somebody wants to relieve you of your hard-earned money, we should be shouting from the rooftops about how the tax relief makes a pension a more effective money grower than almost any other mainstream investment.

We should be doing more to encourage those millions of workers with workplace pensions to find out how much they can increase their own contribution by and whether this means their employer will increase theirs. They often will and that is fundamentally free money!

In the end it all comes back to financial education and developing a culture from the earliest age that embraces the concept of delayed gratification, where making a small sacrifice today can have significant benefits tomorrow.

Young people should be leaving school and heading off into the world of work with the seeds of financial capability already firmly planted, where they understand about budgeting, saving, pensions and that wonderful world of compounding.

Of course it is never too late to start saving for retirement but maybe in the future, rather than posters on a maths books, some Pink Floyd lyrics might be more appropriate. 

You are young and life is long, and there is time to kill today

And then one day you find ten years have got behind you

No one told you when to run, you missed the starting gun

Or to misquote another Pink Floyd classic, when it comes to financial education, we can no longer afford to leave them kids alone.  

The Partner Practice is an Appointed Representative of and represents only St. James's Place Wealth Management plc (which is authorised and regulated by the Financial Conduct Authority) for the purpose of advising solely on the group's wealth management products and services, more details of which are set out on the group's website The 'St. James's Place Partnership' and the title 'Partner' are marketing terms used to describe St. James's Place representatives.

Penney Financial Partners is a trading name of Penney Financial Partners Ltd. Penney Financial Partners Limited is registered in England and Wales, Number 09964340. Registered Office: Kensington House, Knights Way, Battlefield, Shrewsbury, Shropshire, SY1 3AB, UK