Alongside two of its charity partners, MyBnk and the Just Finance Foundation, abrdn has penned an open letter to The Rt Hon Bridget Phillipson MP, Secretary of State for Education. The letter calls for action to address the UK’s low levels of financial education.

As part of The Savings Ladder campaign launched earlier this year, to help tackle the UK's looming retirement challenge, abrdn set out a series of policy recommendations to address the growing need for a ‘savings ladder’ culture, where saving, investing and pensions become a much bigger part of how people view their finances throughout their lives.

Financial literacy in numbers

Following on from the campaign launch earlier this year, abrdn's latest research reveals that people with low financial literacy are typically worse off than those with high financial literacy, even when their earnings are similar. (1)

Similar trends emerged amongst higher earners, and the numbers are life changing: 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. (2)

Only two-thirds (66%) of people on low incomes with poor financial literacy have savings, compared with four-fifths (79%) of people in the same earnings bracket who have high financial literacy. Even when they do have savings, they hold on average £5,500 less than those with high financial literacy.  

It shows 77% of people on middle incomes with poor financial literacy have savings – compared with 88% in the same earnings bracket with high financial literacy. The average gap between these groups when they do hold savings is £13,500.  

Even those on high incomes are still more likely to have savings and a pension if they are more financially literate. 80% of people with a high income but low financial literacy have savings, compared with 94% for those with high financial literacy. Some 41% of high earners with low financial literacy have a pension, compared to 66% of high earners with high financial literacy.

Our research also revealed strong public support for financial education in schools. Consumers ranked it most important out of a list of school subjects, which included languages, PE, music, and sex and health education.

Sarah Moody, Chief Corporate Affairs and Sustainability Officer, abrdn, added: 

"These findings reinforce the need for an urgent intervention. 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."

Call to action

In the letter addressed to The Rt Hon Bridget Phillipson MP, abrdn urges the Government to take action to address the significant economic and social problems the current state of financial literacy contributes to. These problems are hampering the nation’s financial resilience, and the UK Government’s economic growth mission.

The letter also addresses the pressing issue of the 'retirement savings gap'. 

Millions of Britons are facing a difficult retirement as savings are not on track to meet their future needs. The days when people could rely on final salary workplace pensions that would guarantee their retirement income are over. Responsibility is increasingly falling on the individual to ensure they are saving and investing enough for later life.

You can read the letter and Press Release with more research and commentary from abrdn here:

Letter to Government

Press Release