Confusion over financial terminology could mean millions are taking out policies or financial products without fully understanding what the product offers*
- Nearly one third (29%) of UK adults have continued using uncompetitive products for longer than necessary due to ignoring confusing information
- Londoners are most likely to have lost money because they ignored important financial information (17% vs 13% UK average)
- Less than a quarter of UK adults (22%) say they know what a defined contribution pension is
- Yet, more than two in five (43%) UK adults know the capital of Peru while 26% can explain football’s offside rule
Two in five (41%) UK adults have ignored information given to them by financial providers because they didn’t understand the terms used in them. As a result, almost half (45%) of them say they have a poor understanding of how an account or policy works – rising to 52% of people in the South West [Table 1]. And almost a third (29%) of UK adults have continued to use uncompetitive products for longer than necessary – increasing to 37% in Scotland.
As a result of ignoring information, one in six (17%) say they have missed an important change to their policy, and this figure rises to over a fifth (21%) of people in London. Londoners are also most likely to claim that they have lost money because they have ignored important financial communications (17% vs 13% - UK average).
To help combat the confusion caused by complex terms when taking out financial products such as pensions, Aviva is piloting an Insurance Jargon Buster Skill on Amazon’s Alexa platform, providing users with instant access to a glossary of over 300 insurance terms and their definitions. Since its launch some of the most common terms asked include ‘no claims discount’; ‘premium’; ‘annuity’ and ‘pension’.
It perhaps comes as no surprise then that when Aviva tested consumers’ understanding1 of common pension terms alongside their general knowledge [table 2], their pension knowledge often came up short. More than two in five UK adults (43%) could accurately identify the capital of Peru, jumping to half (51%) of Scots, while a quarter (26%) of UK adults could correctly explain the offside rule in football – rising to 30% of Londoners.
In contrast, fewer than one in four (22%) UK adults were able to choose the correct definition of a defined contribution pension, income drawdown (22%) or an enhanced annuity (16%), despite these products being an important aspect of retirement planning. People in Wales are least likely to know what these common pension terms are (13%, 17% and 11% respectively).
Scots are more likely to know what breed of dog a Jack-A-Poo is (20%) than how to accurately describe an enhanced annuity (14%). And only 19% of those surveyed in Wales know what a defined benefit pension is, compared to just over a third (35%) of Londoners.
Alistair McQueen, Head of Savings and Retirement at Aviva, comments:
“There are now so many more options open to customers when it comes to retirement planning that it’s vital they have the knowledge to make informed choices and pick the best path for them.
“Having a poor understanding of how an account or policy works, or continuing to use uncompetitive products for longer than necessary can make a real difference when it comes to your income in retirement. As well as our new jargon buster on Alexa, Aviva has a whole host of valuable information on our website to help customers understand their pensions.
“Of course, the financial services industry needs to ensure that information is communicated in a clear and consistent manner, avoiding unnecessary jargon wherever possible. The Association of British Insurers (ABI) has already carried out some positive work in this area by producing a guide to simplifying language for customers at retirement and we’re completely in support of these principles.”
Ends
If you are a journalist and would like further information, please contact:
Aviva Press Office: Fiona Whytock on 07800 692299 or fiona.whytock@aviva.com
Aviva’s spokesperson, Alistair McQueen, is available for comment/interview.
See what Amazon's Alexa can do in this short film - YouTube
Listen to Alisatair McQueen on Sound Cloud:
Why understanding financial terminology is important
How Aviva is taking on financial jargon
Methodology:
* The research was conducted by Censuswide, with 2027 General Consumers aged 18+ in the UK between 26th October and 31st October 2016. The survey was conducted from a nationally representative sample of UK adults by age gender and region. Censuswide abide by and employ members of the Market Research Society which is based on the ESOMAR principles.
Table 1: Consequences of ignoring information given by financial providers because the terms used were not understood
|
| UK % | London | Midlands | N. West | East | Scotland | S. East | S. West | Yorkshire |
| Poor understanding of how the policy works | 45% | 45% | 48% | 45% | 42% | 47% | 41% | 52% | 47% |
| Using an uncompetitive product for longer than necessary | 29% | 21% | 36% | 26% | 32% | 37% | 30% | 18% | 30% |
| Missed an important change to policy | 17% | 21% | 15% | 16% | 14% | 21% | 16% | 10% | 7% |
| Lost money by not understanding the terms used | 13% | 17% | 11% | 16% | 8% | 15% | 14% | 7% | 10% |
% among those who have ignored financial information in the past. Percentages add up to more than 100% as respondents could select more than one answer. Some regions have not been included due to sample size.
Table 2: Percentage of UK adults who chose the correct definition/explanation
|
| All | London | Midlands | N. East | N. West | East | Scotland | S. East | S. West | Wales | Yorkshire |
| Semi-colon | 47% | 45% | 41% | 44% | 47% | 47% | 51% | 54% | 47% | 51% | 51% |
| The capital of Peru | 43% | 44% | 42% | 43% | 48% | 43% | 51% | 40% | 39% | 40% | 43% |
| Annuity | 39% | 39% | 41% | 39% | 38% | 43% | 42% | 37% | 40% | 27% | 42% |
| Defined benefit pension | 28% | 35% | 28% | 29% | 26% | 26% | 34% | 30% | 25% | 19% | 29% |
| The offside rule | 26% | 30% | 27% | 38% | 24% | 22% | 35% | 21% | 22% | 25% | 27% |
| Bonds | 23% | 27% | 23% | 24% | 23% | 17% | 27% | 24% | 18% | 13% | 25% |
| Defined contribution pension | 22% | 28% | 22% | 24% | 19% | 22% | 27% | 23% | 18% | 13% | 25% |
| Income drawdown | 22% | 25% | 22% | 16% | 19% | 23% | 28% | 25% | 19% | 17% | 24% |
| Jack-A-Poo | 18% | 13% | 19% | 19% | 21% | 19% | 20% | 16% | 17% | 23% | 20% |
| Enhanced annuity | 16% | 18% | 17% | 18% | 14% | 19% | 14% | 13% | 14% | 11% | 18% |
| Espresso martini | 11% | 19% | 9% | 9% | 11% | 11% | 10% | 12% | 6% | 13% | 10% |
Notes to editors:
- Aviva provides life insurance, general insurance, health insurance and asset management to 33 million customers, across 16 markets worldwide
- In the UK we are a leading insurer serving one in every four households and have strong businesses in selected markets in Europe, Asia and Canada. Our shares are listed on the London Stock Exchange and we are a member of the FTSE100 index.
- Aviva’s asset management business, Aviva Investors, provides asset management services to both Aviva and external clients, and currently manages over £319 billion in assets.
- Aviva helps people save for the future and manage the risks of everyday life; we paid out £30.7 billion in benefits and claims in 2015.
- By serving our customers well, we are building a business which is strong and sustainable, which our people are proud to work for, and which makes a positive contribution to society.
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- See what Amazon’s Alexa can do in this short film
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