According to eurostat, 11.4 % of men and 15.6 % of women in the EU are at risk of old-age poverty. Do you know how to save best for your pension?

Pensions in Europe are high on the agenda of both the European Union and its member states. Given the major challenges of changing demographics and persistent low interest rates, it comes as no surprise that legislators at various levels identified the future development of pension systems as key to a number of related areas, ranging from the prevention of old-age poverty to ensuring the stability of public finances and economic growth. Ensuring the long-term stability of pension systems has also been addressed by the European Parliament – a recent paper identifies pension adequacy and sustainability of European pension systems as the two most important issues to be addressed in reforms currently being discussed and/or implemented in many member states.

Reform isn’t enough – people need to understand their options in order to make the right choices.

The changes in pension systems that are required to reach these goals, however, need also to be understood by European citizens. Aside from understanding why reforms are necessary, some of the measures suggested in this discussion (e.g., reducing the reliance on the historically dominating first-pillar state pensions and supplementing them by increased private pension savings) can only work if a large share of citizens understand the importance of private pension savings, their mechanics, and basic principles (e.g., the benefits of starting early in life to save for retirement). Knowledge about financial matters in general shows considerable room for improvement according to many recent studies. Regarding the knowledge in the area of pension finance in particular, the situation is complicated further by the fact that a solid understanding of the topic requires some understanding of insurance basics, demographic trends, and institutional specifics on top of financial matters like discounting and annuities. Since the entire working population is affected by pension systems, and increasing private pension savings can only work through more workers/contributors „opting into“ additional (voluntary) third-pillar schemes, improving the understanding of pension systems and pension finance in the general population is important.

A vast majority of students in higher education programmes never make any contact with the field of pension finance.

However, also in higher education programs there is ample room for improvement in this regard: Aside from programs where pension finance is at the core (e.g., insurance  mathematics), the vast majority of students even in closely related programs like finance, economics, or business and management, never make any contact with the field. This implies a need for including pension finance knowledge also in programs at this level.