Financial Literacy: 83% of Brits underestimate their annual retirement income by £10k

_{*the full list of statements can be found in the methodology} 

The study also revealed that most people have big gaps in their financial literacy. For example, you may feel confident about saving practices, but not know about how inflation works. Only 1% of respondents were able to answer every single question correctly.

The top 5 most misanswered questions

1. What is a moderate annual income for a single pensioner?

Although 74% of UK adults have a private pension, according to the most recent statistics released by Gov.uk, the number of members making individual contributions to a personal pension decreased to 6.8 million in 2022 to 2023 from 7.4 million in 2021 to 2022.

How much you should save for your retirement years depends on the type of lifestyle you want to maintain, but as a guideline, the Pensions and Lifetime Savings Association (PLSA) calculated how much pensioners need to maintain a minimum, moderate, and comfortable lifestyle.

When we asked respondents to guess how much a moderate standard for a single pensioner was, the majority (83%) underestimated the cost by at least £10,000 a year. Only 11% correctly guessed that to maintain a moderate lifestyle (which allows for a car and one two-week foreign holiday a year) a single pensioner needs to budget £31,300 per year after tax.

If a full state pension is received, this means that the average single pensioner needs to save around £555,000 for their retirement.

Interestingly, those over 60 were slightly more likely to incorrectly guess the answer – and more likely to opt for the smallest amount (£12,400 per year) than younger participants (31% compared to 22%).

2. Which of the following statements is false about stocks and bonds?

According to a report by Finder in 2024, an estimated 23% of the population actively invested in the stock market. There is also a large gender disparity when it comes to investing. One survey found that women were 18% less likely to invest in stocks and shares than men. One reason given was that 52% of women said they felt they did not know enough about online trading and investing.

So how knowledgeable are Brits about stocks and bonds, and is there a gender knowledge gap? Although 38% of our respondents did identify the false statement about stocks and bonds in the list, this was still the 2nd most incorrectly answered question in the survey.

There was a significant knowledge gap between men and women. 41% of men correctly answered this question compared to 33% of women. However, for women wanting to get into investment but unsure where to start, there are resources online specifically designed to empower women investors and close the gender disparity.

3. When does the British fiscal year run from?

The tax year runs very differently in the UK than in other countries around the world – but do people know when it is? Only 46% of respondents knew that the tax year runs from April 6th to April 5th. Getting these dates wrong could create huge financial risks for self-employed people and business owners.

But why does the fiscal year start at such a strange point in the year? The reason is long-winded and historical. Until the mid 18th century, the new year (and financial year) started on the 25th March. When the Gregorian calendar (what we use today) was adopted there was an 11 day discrepancy so the fiscal year was moved to April 5th.

4. At what age can you currently access your State Pension in the UK?

The topic of pensions comes up again in the list of most incorrectly answered questions. This time 52% of respondents incorrectly guessed the correct age you can collect your state pension. However, those aged 60+ were 24% more likely to correctly guess that the state pension age is 66 (72%).

The age you can collect your pension is adjusted to life expectancy, and before the Pensions Act of 1995 the state pension had been 60 for women and 65 for men. At the time of writing (January 2025) the state pension age is 66 – a figure that 48% of respondents guessed correctly. However, the pension age is gradually being raised to 68 by 2046, so this figure is not static.

5. What is the full rate of the new State Pension per week?

Completing the top five most incorrectly answered questions is another pension question – meaning that 3 of the top 5 incorrectly answered questions were on this theme. Although the majority of people (64%) correctly guessed that the state pension is £221.20, 19% of people overestimated the weekly allowance, and 18% of people underestimated the allowance.

Again, those aged over 60 were more likely to correctly guess this answer. Four in five (79%) of those aged 60+ correctly answered that the rate of the full state pension is £221.20.

Again, like the pension age, the rate of the State Pension is frequently adjusted to consider the changing cost of living. It’s also important to know that you may get more or less depending on your National Insurance (NI) record – and usually, you need more than 10 years of NI contributions to be eligible for the State Pension at all.

74% said their schooling did not prepare them enough to navigate the finances as an adult

Despite just a few being able to correctly answer all the questions when asked to rate how confident they felt handling money out of 10, with 10 being the most confident, the average person said they were a 7 out of 10. In fact, 81% of people rated their financial literacy a confident 7 or above out of 10. But this confidence doesn’t seem to convert into real, practical knowledge.

The majority (87% of respondents) said that they consume financial related content in their spare time. Activities include reading a personal finance book, listening to a podcast, watching the stock market, or consuming financial information on TikTok or social media.

Financial education pays off: only 8% of those earning more than £100,000 per year never consumed financial-related content, compared to 22% of those earning less than £25,000.

But if the majority of people are informing themselves about personal finance in their spare time, and feel confident handling their money, how come so many people are unable to answer all the financial questions correctly? Nearly three quarters, 74%, of respondents said that their schooling did not prepare them enough to navigate the financial world as adults.

23% of Brits have less than £500 saved for emergencies

Most respondents (72%) correctly knew that an emergency fund is an accessible savings account with money set aside and only used in case of unplanned events. The most common incorrect answer (17%) was that an emergency fund is the money set aside by the government in case of an unforeseen crisis (like the COVID-19 pandemic) – a possible confusion with BBL (Bounceback loans).

We also asked respondents if they had an emergency fund and if so, how much they had in it. One in ten people (12%) said that they didn’t have an emergency fund at all and 23% have less than £500 saved for emergencies. The good news is that a vast majority (88%) of respondents have an emergency fund. Luckily 30% of people said they have more than £10,000 set aside.

It’s recommended that people have between three and six months’ worth of essential outgoings (like rent or mortgage, food, and bills). Taking an average of all answers, the study average amount that people had in their savings was £8,549.

Methodology

The survey was conducted in December 2024 via the survey platform Pollfish. A total of 1,050 British adults were surveyed about their confidence with money, what financial informational resources they engage with, and the money they had set aside for emergencies. They were then asked 10 questions to test their financial literacy across subjects like investments, savings, pensions, and taxes