More people know the capital of Peru than understand pension and insurance jargon

3 February 2017
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Financial information is a verbose minefield for many, which can lead to people losing their money, according to new research conducted by financial services provider Aviva.

The findings include some interesting numbers, with ones of particular concern being: 46% of UK adults know the capital of Peru (Lima), compared to 22% knowing what a defined contribution (DC) pension is, and while 26% are able to explain the offside rule, 30% think home insurance covers “anything that happens in their home”.

It’s not just a lack of knowledge that’s a problem either – misunderstandings are also rife. For example, 53% of those asked said they knew what an annuity is, but 27% of those people, when asked for a definition, chose the wrong one.

 

In addition, 41% of those asked have ignored financial information provided, such as pension or bank statements, citing a lack of understanding of the terms used, and of those, 13% said that they have lost money due to ignoring communications.

Alistair McQueen, head of savings and retirement at Aviva, says: “It doesn’t come as a surprise that people are more tuned into the subtleties of the offside rule than pensions and insurance products.

“All the same, the consequences of being in the dark about your finances are rather more serious than your sporting knowledge being found wanting.”

In a bid to combat this financial minefield, Aviva has released an ‘Alexa Skill’ for Amazon’s Echo – a voice activated software control system for media players, home lighting and more - which allows you to ask for a definition of insurance terms via voice control. The Alexa Skill tool is free to download, although Amazon’s Echo is a hefty £150. 
 

Percentage of UK adults who chose the correct definition/explanation

TermAllMenWomen
Semi-colon47%47%47%
The capital of Peru43%52%35%
Annuity39%47%31%
Defined benefit pension28%37%20%
The offside rule26%40%14%
Bonds23%26%20%
Defined contribution pension22%29%16%
Income drawdown22%30%15%
Jack-A-Poo18%15%21%
Enhanced annuity16%21%11%
Espresso martini11%8%15%

 

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