Abrdn in partnership with MyBnk and Just Finance Foundation have written an open letter to the secretary of state for education calling for action to address the UK’s low levels of financial education.
The letter follows research carried out by Abrdn which found people with low financial literacy are typically worse off than those with high financial literacy, even when their earnings were similar.
Other findings showed lower earners with poor financial literacy experienced a ‘pension penalty’ of £10,000 meaning they had that much less in their retirement pots compared to lower earners with high financial literacy.
Similar trends emerged amongst higher earners as those with low financial literacy suffered a pension penalty of £87,500 less in their retirement pot when compared to higher earners with high financial literacy, who were also more likely to have a pension to start with.
The research also revealed 66 per cent of people on low incomes with poor financial literacy had savings, compared with 79 per cent of people in the same earnings bracket who have high financial literacy.
Even when they did have savings, they held on average £5,500 less than those with high financial literacy.
Sarah Moody, chief corporate affairs and sustainability officer at Abrdn, said: “It is extremely difficult to unpick the impact poor financial literacy has on people’s economic outcomes from other, related factors such as their socioeconomic background.
“However, our research found that those with poor financial literacy are worse off, even when earnings are taken into account.
"Financial education in schools, done well, could be a key lever to help build the nation’s long-term financial resilience and improve social mobility. It’s often said that ‘money makes money’, but financial education is key to keeping, and growing it.”
To address the UK’s low levels of financial literacy, abrdn has called on the government to:
- Extend mandatory financial education to primary schools and sixth forms in England to ensure fewer young people miss out on a financial education.
- Integrate finance into relatable subjects, from maths, economics, citizenship and food tech. Scotland has already integrated personal finance across the curriculum, and abrdn would like to see consistency across all four nations.
- Discuss a new GCSE and sixth form qualification (or equivalent as per exam systems in other home nations) that focuses on financial skills.
“At Abrdn, we believe the government should undertake a much-needed shake-up of financial education in schools as well as starting to officially measure financial literacy levels in the UK – just as 39 other countries already do.
“By solving this problem, we can support more people to feel financially secure and become long-term savers and investors. There would be huge economic benefits to this too, unlocking millions of pounds of capital and reducing pressure on the state to support people into retirement.
“Just as we already encourage people to save to get on the property ladder, better financial education would be a key step in helping to build what we call a ‘Savings Ladder’ culture,” Moody added.
alina.khan@ft.com
