abrdn, MyBnk and Just Finance Foundation pen open letter to Secretary of State for Education

People with low financial literacy are typically worse off than those with high financial literacy, even when their earnings are similar, new research from abrdn has found [1].

The investment company’s findings show that people who have poor financial literacy are significantly less likely to have savings or a pension than people on similar incomes who have high financial literacy. This suggests that better financial education in schools could be a key lever of increased social mobility.

abrdn, the Edinburgh-headquartered, global investment company, has penned an open letter alongside two of its charity partners, MyBnk and the Just Finance Foundation, 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.

People on low and middle incomes [2] with poor financial literacy hold less in their savings than those earning a similar amount with high financial literacy, abrdn found.

Other findings include: 

  • When it comes to pensions, lower earners with poor financial literacy experience a ‘pension penalty’ of £10,000. That’s how much less they have, in median terms, in their retirement pots compared to lower earners with high financial literacy. This latter group are also far more likely to have a pension in the first place.

  • 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.

  • 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.

  • 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 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.

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

“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.”

   % of people that hold savings  Median amount in savings  % of people that hold pensions  Median amount in pensions

Low income (<£30k),

Low financial literacy

 66%  £2,000  30%  £7,500

Low income,

High financial literacy

 79%  £7,500  43%  £17,500

Middle income (£30-60k),

Low financial literacy

 77%  £4,000  55%  £37,500

Middle income,

High financial literacy

 88%  £17,500  66%  £37,500

High income (£60k+),

Low financial literacy

 80%  £87,500  41%  £87,500

High income,

High financial literacy

 94%  £37,500  66%  £175,000

The pension figures do not include those with defined benefit pensions.

abrdn’s 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.

The findings follow on from abrdn’s Savings Ladder Index, launched this July, which included the UK’s first-ever regular on-going barometer of financial literacy among UK adults.

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.

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.”

In abrdn’s Savings Ladder Index, it asked respondents the Global Financial Literacy Excellence Centre’s 'Big 3' financial literacy questions*, which are used as an international standard for comparison. The research found that 44% of UK adults have poor finan literacy, extrapolating to 23.3 million UK adults.

The index also looked at people’s propensity to save and invest, based on a number of factors, as well as measuring average savings, investments and pension levels.

Financial education policy recommendations

To address the UK’s low levels of financial literacy, abrdn has called on 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 already integrate personal finance across the curriculum, and abrdn would like to see consistency across all four nations.

  • Discuss a new GSCE and sixth form qualification (or equivalent as per exam systems in other home nations) that focuses on financial skills.

Sarah Wallace, Director of the Just Finance Foundation, said:

“This research not only underlines the chronic state of financial literacy in the UK, but also suggests that a shake-up of financial education in schools could have far reaching benefits for society. Being financially literate makes you financially better off, whatever your earnings level, showing that a little bit of knowledge goes a very long way when it comes to personal finances.”

Leon Ward, Chief Executive of MyBnk, said:

"The evidence is clear: financial fluency isn't just a skill, it's a necessity. This research further highlights the critical gap in our education system, where the absence of comprehensive financial education leaves people at risk of being left behind. At MyBnk, we believe that financial literacy should be considered a right for all, because the language of money is a language for life. We’ve seen first-hand how early financial education empowers young people, giving them agency to make informed decisions, avoid debt and build a more secure future. This is not just about improving individual outcomes, but about strengthening the financial resilience of society as a whole."

[1] Study conducted by Opinium Research for abrdn in May 2024 amongst a nationally representative sample of 3,000 UK adults

[2] Low incomes were classified by Opinium as <£30,000, middle as £30,000 to £60,000 and high as £60,000+

Ends

Media enquiries

Jemma Jackson
Head of Campaigns and Media, abrdn
jemma.jackson@abrdn.com
07776 204 610

Marianna Hunt
Campaigns Manager, abrdn
marianna.hunt@abrdn.com
07442 806 207

Notes to editors

The research was conducted by Opinium Research amongst a nationally representative sample of 3,000 UK adults between 10 May 2024 – 17 May 2024.

*The ‘Big 3’ financial literacy questions posed were:

1. Suppose you had £100 in a savings account and the interest rate was 2% per year. After 5 years, how much do you think you would have in the account if you left the money to grow?

  • 70% correctly answered: More than £102

2. Imagine that the interest rate on your savings account was 1% per year and inflation was 2% per year. After 1 year, with the money in this account, would you be able to buy…

  • 58% correctly answered: Less than today

3. Do you think the following statement is true or false? Buying a single company stock usually provides a safer return than a fund [that invests in the stock market on your behalf.

  • 34% correctly answered: False

A fifth of UK adults (20%) were unable to correctly answer any of the “Big 3” financial literacy questions asked of them. A quarter (24%) only answered one question correctly. We consider these groups (44% - equating to 23.3 million UK adults) as having poor financial literacy.

Those who could answer 2/3 or 3/3 questions are defined as having ‘high’ financial literacy.