An optimistic expectation of an £800 a week State Pension is an example of why teenagers soon to enter the world of work need a wake-up call about the importance of saving for old age.
The ambitious suggestion – equivalent to a salary of nearly £42,000 a year – was one of a number of eyebrow-raising answers given when Pensions Minister, Steve Webb, quizzed school pupils about their pensions knowledge.
At the other end of the scale, another youngster thought today’s basic State Pension was worth just £9 per week. The actual figure is £113.10. Seven out of 10 of the teenagers asked thought the government would provide most of their income when they retired and 8 out of 10 thought they would retire in their mid-60s.
Now the government is to develop new and improved resources for teachers, enabling them to plan more inspiring lessons about the importance of pension saving – and crucially, how new automatic enrolment legislation will affect them from the age of 22.
Pensions Minister Steve Webb said:
We are in the process of delivering some of the most radical reforms to our pensions system for decades but, if these reforms are going to succeed in building the fairer society we want, it is essential young people enter the workplace understanding them.
It’s understandable for young people to glaze over when you ask them to think about retirement and pensions. But when you tell a teenager that this is going to affect them from the age of 22, you get quite a different response. This isn’t telling kids to think about old age, it’s helping them understand the world of work they’re about to enter.
The Department for Work and Pensions is to team up with financial education charity, the Personal Finance Education Group, to produce new teaching materials to help get information about financial planning into the classroom and boost saving for later life.
The aim is to have high quality teaching resources available for schools across the UK later in the year.
With automatic enrolment due to see millions of workers put in to a workplace pension scheme from the age of 22, the government believes it’s essential young people enter employment understanding the importance of saving and the consequences of opting out.
In researching the plans, Steve Webb spent a morning at a secondary school – St Albans Girls’ School in Hertfordshire – chatting to pupils from year 9 up to sixth form, as well as teachers, about their attitudes towards financial education.
During his visit to the Ofsted outstanding-rated school, he quizzed some of the year 9 pupils to test their knowledge. As well as getting some surprising answers, he discovered that none of the students surveyed knew whether or not their parents saved into a pension and none of them could ever recall having had a conversation about pensions before.
Steve Webb added:
This is clearly an outstanding school with impressive, engaged and politically aware pupils, and my visit convinced me that it is possible to talk to young people about these long-term issues in a way that interests and engages them. But we have to give teachers the tools to do the job.
Under automatic enrolment, young adults are leading the way in saving, with workers in their 20s the least likely age group to opt out. Ministers want to ensure this remains the case and believe providing the right support to school teachers will help achieve that.
The new initiative comes on the back of other efforts to help the UK public better understand pensions and saving. For example, DWP recently launched PensionTube, a new online hub within the video sharing website YouTube, bringing together content from the government and trusted independent sources that will in time cover the whole spectrum of pension-related issues.
The DWP has also launched major advertising campaigns. The Your State Pension, Your Future adverts seek to raise awareness of reforms to the State Pension which will create a clearer and fairer foundation for people to build their own retirement saving upon.
And the long-running We’re all in adverts, raising awareness of workplace pensions automatic enrolment, continue to run prominently as the policy is fully rolled out to all employers between now and 2018.
St Albans Girls’ School
St Albans Girls’ School in St Albans, Hertfordshire, is a specialist business and enterprise academy and is judged outstanding by Ofsted. Steve Webb met year 9 (S2 equivalent in Scotland), year 10 (S3), year 11 (S4) and sixth form (S5/S6) pupils.
In England, Wales and Northern Ireland, the new citizenship curriculum at key stages 3 and 4 aims to ensure that all pupils are equipped with the financial skills to enable them to manage their money as well as to plan for future financial needs. At key stage 3 pupils should be taught about the functions and uses of money, the importance of personal budgeting, money management and a range of financial products and services. At key stage 4, wages, taxes, credit, debt, financial risk and a range of more sophisticated financial products and services including pensions should be taught.
In Scotland, responsibility for education is a devolved matter. The Scottish Curriculum for Excellence also makes provision for financial education.
Research and statistics
Research published recently by Ipsos MORI, on behalf of DWP, about understanding of the State Pension found that many adults lack understanding of how the system works. Some 53% of 22 to 34-year-olds said they agree they need to find out more about saving for retirement, compared to 44% of those aged 35 to 49 and 30% of those aged 50 to 64. This research was based on 2,212 face-to-face interviews with adults aged 22 and above, between 4 July 2014 and 24 July 2014.
Recent DWP figures show that young people working in the private sector showed the largest increase in the proportion saving into a pension, growing more than any other age group – 30% of those aged 22 to 29 saved in 2013 compared with 24% in 2012. The figures show that automatic enrolment into workplace pensions is continuing to play a major role in reversing the decade-long decline in private sector pension saving. In October 2014 we published statistics on automatic enrolment – Workplace pension participation and savings trends: 2003 to 2013.
Employers have to automatically enrol workers from age 22 into a workplace pension. However those aged 16 to 22 can opt in provided they earn more than £10,000 (2014 to 2015) a year.
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