Personal PensionAug 15 2014

More confidence in explaining physics than annuities

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Understanding of financial terms is still low across the general populous, with research from Friends Life demonstrating that more people find it easier to explain the offside rule than they do a pension.

A survey of 2,000 UK adults carried out by One Poll on behalf of Friends Life revealed that one in five would find it easier to explain the notoriously mis-understood football rule, the off-side rule, with just one in 20 who felt “most confident” to describe a pension.

The same went for life insurance, with only one in 10 believing they could most easily explain life insurance, while understanding of the term annuity is particularly low despite the Budget announcement that people would be able to access their pension pot without buying one.

In fact, more people felt it would be easier to explain the existence of ghosts.

Colin Williams, managing director of corporate benefit at Friends Life, said: “This just goes to show just how important it is that consumers have at least some understanding of their finances.

“The offside rule is notoriously tricky to describe, so to hear that more people would find it easier to explain than a pension or life insurance is a concern.”

Income drawdown fared even worse in the poll, with people stating they were more able to explain the ‘big bang’ and particle physics.

Income protection did not fare much better, with more people feeling it would be easier to explain the human digestive system or how rainbows are formed.

Mr Williams said: “Pensions, annuities, income protection....these are terms that more people need to be aware of because they’re important financial products.

“Getting more people able to explain income drawdown over the offside rule might be a little ambitious, but as the world of retirement is changing we need to make sure people’s understanding increases as well.”