Walter Mischel’s infamous marshmallow experiment of the 1960s demonstrated just how difficult it is for children to resist having something now, even if it means having something better later.

I’m sure many of us have been amused watching four-year olds with the impossible task of resisting a marshmallow while the adult left the room, despite the promise of two marshmallows when they return 15 minutes later.

This experiment looked at delayed gratification and the impact on the future success of these children, but I can’t help thinking this idea of giving up something today, for something bigger and better in the future is completely aligned with our attitude to pensions.

With pensions, we are asked to take some of the money that we could have in our pocket, or make sacrifices today, in order to save for a potentially better return when we retire. In fact, with tax savings and employer contributions, we should see the immediate accumulation of this money, even before potential investment growth. Yet, just like those children, saving for a future promise seems a huge challenge and as a nation, we are woefully underprepared for retirement.

There has been a significant shift in government and company support for pensions over recent years, and the risk and responsibility for preparing and saving for later in life now lies much more squarely with the individual. But with longevity increasing and the likelihood of more time in retirement, are we equipped to support ourselves, and perhaps the lives of our ageing parents when it comes to it?

Financial literacy

Financial literacy is an essential life skill, but unlike most other skills, it is not often taught. This leaves many people ill prepared to manage their day to day finances and budgets, let alone save for the future.

The current global pandemic is putting even greater pressure on individual finances. An FCA survey1 of more than 7,000 people, conducted during the coronavirus pandemic, found 12 million people in the UK had low financial resilience, meaning they may struggle with bills or loan repayments. The data shows 2 million of those who are not financially resilient have fallen into this category since February 2020.

So what does this mean for the future?

There are currently around 12 million people aged 65 and over in the UK. This number is forecast to reach almost 16 million within the next fifteen years and, by 2040, nearly one in seven people is projected to be aged over 752. For many up and coming retirees, who were fortunate to be members of defined benefit pensions schemes which provided greater certainty around their retirement income, how to spend their retirement pot was the biggest challenge. For today’s workforce, most people are saving into a defined contribution scheme which has been fuelled by the introduction of auto-enrolment in 2012.

Auto-enrolment has been applauded for bringing an extra nine and a half million savers into pension schemes, which will go some way to supporting people when they reach retirement age. But, the success of auto-enrolment is hampered by low contribution rates, passive involvement and limited understanding or engagement with funds. At the current rate of contribution, balanced with life expectancy, the amount in defined contribution pension schemes is likely to fall well short of providing a comfortable retirement.

So how can we fundamentally change behaviour to develop a financially literate society that can successfully manage budgets and plan for their later life?

Starting at grassroots

There is no age too soon, to start teaching young people about finance. Children are like sponges and teaching them about money, how to manage it, how it grows and the importance of saving for the future will engender stronger, better financial literacy skills throughout their adult life. It’s not a marshmallow test.

Research3 shows that young people can defer gratification and start saving if exposed to expert-led financial education at primary school age. 7-11-year olds are also able to understand new knowledge such as banking, gain skills like budgeting, forge habits including resisting temptation and conceptualise the future by recognising the consequences of financial decisions.

At Capita, we’ve partnered with Young Enterprise to help support finance skills in young people. Last year’s ‘Young money challenge’ explored the connection between money management and environmental sustainability. The Challenge was hugely successful, with around 1,000 children and young people participating across the UK. This year we’ll be exploring the connection between health & well-being and money management. But this is just the tip of the iceberg.

An industry challenge

As an industry, we need to do what we can to make financial education a life skill. If we carry on as we are, we’re going to reach a tipping point where generations of people cannot afford to retire or will struggle financially and mentally when they hit retirement. We need to realise that pensions are not just a topic to discuss with those people 10, 15 or 20 years away from retirement, but are part of an education process that needs to start 50 years earlier.

Accumulation is key, so the sooner this message gets out the better. We need to teach the younger generation that two marshmallows tomorrow is far better than one today. And as an industry we need to find practical ways to bring this to life. If we are going to truly enable a healthy, financially sustainable society, then financial education must be engaging and start at the very earliest opportunity.

Written by


Jemima FitzMorris

Head of Marketing for Pensions and HRS

Jemima FitzMorris is a Head of Marketing, Pensions and HRS at Capita with has almost 20 years of marketing experience in HR, professional, financial and IT services. She also has extensive experience in the outsourcing industry working for service providers and advisory firms in the IT and BPO space.

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