Saving for Retirement - A Case for Financial Education in Germany and UK? An Economic Perspective

Demographic changes, tight public budgets, and reduced generosity of occupational pension plans shift the responsibility for an adequate retirement provision towards the individual. Applying the theoretical perspectives of Behavioural Finance and New Institutionalism to the domain of retirement provision offers insights into the difficulties individuals are facing in planning for retirement, carrying out, and revising plans. Lacking financial literacy seems to lie at the heart of the problem and points to a possible solution: providing financial education to consumers through non-governmental organizations and state-related agencies. This article is examining which role consumer education and consumer advice can play to enhance financial literacy with regard to pensions and old-age provision. As two case studies Germany and the UK are compared because the institutional set-up of the pension systems and the approaches towards consumer policy are very different. The case studies show that financial education with regard to old-age provision can be successful if it reaches consumers in their environment at life-stages where important decisions need to be made. To achieve that considerable efforts have to be taken in terms of funding and organizational set-up. However, evaluation is necessary to prove the effectiveness of the education especially for vulnerable consumer groups. If evaluation reveals that these groups cannot be targeted effectively or that consumers are not taking action subsequently to attending financial education, there might be a case for changing behaviour through the institutional set-up of pension schemes (i.e., through automatic enrollment) and using financial education as a supportive policy instrument