Financial education needed to raise public awareness of A-Day

Financial education has to be made a priority if the majority of people are not going to miss out on the opportunities of A-Day, according to new research from the Association of Investment Trust Companies (AITC).

The study reveals 83% of active investors are familiar with the upcoming pension changes, and of these a significant 25% are preparing to change their pension portfolios as a result of the new flexible rules. But in contrast 71% of the general public have not heard of the A-Day changes, and of those that have, only 3% are planning to make changes to their pension portfolios after April next year.

In response to these figures the AITC says it is a relevant time to highlight the importance of financial education, and the organisation believes the government needs to set aside sufficient time as well as financial resources if the plan is to work.

The research also highlightes differences between active investors and the general public in their attitudes to investment risk. Around 36% of the general public are prepared to take on some investment risk but they would want a guarantee of getting their original capital back, while 17% say they are not prepared to take any risks with their money, even if it means sacrificing potential returns, compared to just 2% of active investors.

Annabel Brodie Smith, communications director for AITC, says that with so many people in the dark about pensions simplification, the relevant time to raise the issue of financial education must surely be now. She adds the very significant “knowledge gap” identified by the research illustrates something the AITC has known for many years, that being financially aware can have a real impact an individual's financial decisions.

She continues: “A significant proportion of those active investors who have heard about pensions simplification are already planning changes to their pensions. But with the majority of the general public unaware, it looks like the winners, in the short-term at least, are not surprisingly going to be the financially savvy minority. The pension changes present a real opportunity for the financially aware or those who have access to advice, but unless the issue of financial education is addressed the majority of people are going to miss out.”

In September IFAonline revealed the government plans to introduced financial education to the school curriculum at year 11 by September 2007. Meanwhile Stephen Timms, Minister for Pensions Reform, at the Departmenet for Work and Pensions (DWP) told an EU presidency meeting in Brussels ealier this month that financial education was "crucial" to helping people plan sensibly for their retirement. A spokeswoman at the DWP referred IFAonline to both the Department for Education and Skills and the Treasury, when asked to respond to the AITC's call for time and resources to be put aside to implement financial education as a government policy.

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