Recent research from the USA has shown that financial education has a direct impact on an individual’s financial planning and improves immediate take-up and savings for retirement. Until now, no similar work has been carried out in the UK; so many people are asking “Will financial education solve the problems with pensions?”
In 2006, Life Academy began a project to provide an educational experience to those in their early 50s to increase their understanding of pension and retirement issues and their financial awareness. The project involved designing and delivering a one-day workshop to provide a focal point that through education and increased awareness might lead to changes in attitudes, intentions and behaviours. Our hope was to motivate individuals to make appropriate decisions about their retirement planning and take action in good time.
Four workshops were delivered in 2006 and a further four are planned for the summer of 2007. Halfway through the programme, now is perhaps a good time to look at what has been achieved so far.
The participants, coming from a variety of backgrounds, all arrived with a range of issues concerning their future, including health and wellbeing, relationships, using time and understanding life changes. 85% of the attendees were equally concerned about planning their finances and paid work. This closely tied in with the purpose of the workshops.
At various stages of the programme we collected data on the needs identified by participants concerning their retirement and money. This evaluation measured the participant’s intention to take action at the beginning of the workshop, at the end of the workshop and what action had been taken as a result of the workshop 3 months later.
The evaluation carried out immediately after the workshop sought to determine if there had been a shift in knowledge as a result of the workshop, on topics such as retirement planning; saving; borrowing; credit; personal budgets; investments; tax; short, medium and long-term financial issues. The evaluation showed the workshop provided a significant improvement from 'not understanding' to 'understanding' of 103% and when asked whether they knew where to obtain information about the various topics, that score increased 36%.
At the end of the workshop there was a 140% increase in intention to take action compared to the beginning. This illustrated that the workshop had clearly engaged people with actions they needed to take in terms of key life planning areas.
Three months after the workshop the participants completed their final evaluation, focusing on actions taken. This revealed:
- 59% had obtained a forecast of their state pension.
- 77% had looked at their occupational/personal pension fund statement and forecast.
- 45% had sought financial planning advice.
- 45% had increased their savings/investments for retirement.
- 25% of those eligible had increased their contributions to their pension.
- 27% had changed their intentions about retirement (with the majority intending to work longer).
We also delivered a similar series of 8 workshops for farmers in the south west of England. The objective was to improve financial capability, retirement planning and awareness, and motivate individuals to action so that they could more effectively plan and make provision for their retirement.
The participants had a range of issues at the start of the workshops. Planning their finances and concerns about sources of income and paid work ranked highly followed by health and wellbeing. Farmers are pretty financially savvy and they had a good understanding of financial issues but as a result of the workshop their knowledge of issues such as saving, investment, personal budgets, retirement planning, borrowing and credit increased by 25% and there was a 100% increase in understanding where to get information.
Those attending the workshops had already taken some actions concerning their retirement planning. The pre-course evaluation showed these at 1.87 actions per head and there was an intention to take a further 1.96 actions per head.
Immediately after the workshop 106 retirement planning or financial actions were taken, i.e. 1.29 per head and the intention to take further action had risen to 2.57 per head. The evaluation three months later showed the actions taken and intention to take action had both increased to 3 per individual.
Not only did the workshops increase the knowledge of participants and motivate them to action, there was also an increase of nearly 100% of people seeing an improvement in their work life balance.
These are clear indications that financial education does have an impact on an individual’s retirement and financial planning. To us it is significant that in all three studies mentioned here, the participants experienced a face-to-face learning experience. We believe that to motivate an individual to action it is first necessary to overcome the barriers posed by existing attitudes, beliefs and emotions. Only when those are overcome will an increase in both knowledge and particularly understanding lead to rational consideration that leads to action.
As a Prime Minister once said ‘Education, Education, Education’ but it has to be high quality education, tailored to the audience, well delivered and at a time in their life course which makes it relevant to their needs.
