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**This blog was originally published in German by Susanne Witt and has been translated by EPALE Ireland.**  

What contribution can adult education make to help people become more familiar with the financial possibilities of pension provision? The state pension for salaried employees is provided by the employer as part of the payroll. But what are the advantages of an occupational pension scheme - for employers and employees? Why is a private pension scheme indispensable for the self-employed and attractive for employees? Beginning with the contribution to pension provision within the competence model for basic financial education, this article will look at further aspects of pension provision from different perspectives. This shall always be considered in relation to the design of a training programme. Let's talk about money, your money.

18.7 percent of the total population in Germany were at risk of old-age poverty in 2018. There are now 3.1 million people over the age of 65 and this figure is increasing. Moreover, the number of people working on a mini-job basis is continuously increasing. This amounted to 7.7 million employees in 2019. Besides the many families affected by poverty, half of the 25.9 million pension recipients in Germany are also entitled to state benefits.

Basic financial education

Basic financial education addresses the "fundamental and direct requirements of everyday life and the management of monetary affairs" (Mania & Tröster, 2014, p. 140).

"Managing money" is described as the most important skill by German citizens in the Allensbach IFD survey (11088), even ahead of arithmetic, reading or knowing how to use a computer. Mania and Tröster include provision and insurance as the sixth competence domain in their competence model for basic financial education. The topics of pension provision, insurance, savings and asset accumulation are explored from the perspective of safeguarding against life risks. Instructors receive two sets of materials for use during their basic education courses: Marie and Pension Provision and Grandma Matilde and Retirement.

Both sets focus on exemplary competence skills, which include understanding technical terms and concepts and assessing and understanding pension expectations. The first set of materials,Marie and Pension Provision, tackles family role distribution, life plans, life goals, fears about the future and fairness when it comes to money from a "non-cognitive aspect" perspective. The second set of materials focuses on reflecting on the future situation and what it means for one's current life situation. How does early retirement affect one's future?

The following ideas for designing a teaching and learning programme are intended to go beyond basic financial education.

The participant's personal perspective

Before thinking about types of investments, it makes sense to take stock of one's own life circumstances. Some of the variables that need to be taken into consideration are age, health, family status and family planning, time remaining to retirement and the housing situation. In addition to just filling out a checklist, it is also important to define individual goals, development perspectives and time frames as part of the biographical process.

What information should a training programme for pension provision contain?

Basic differences concerning the different income groups (employees, civil servants, self-employed) form the basis for the topics covered in the training programme. Who needs to take action themselves?

The three pillars of the pension system, statutory, occupational and private, provide the framework for the content of the training programme. The basics of statutory pension insurance include the definition of a pension point and the amount of the pension, as well as offering an insight into pension information. Various pension models and their possible combinations are available for discussion within the framework of occupational pension insurance. The different topics related to private investment cover everything from shares to the Pension Contracts Certification Act and include a number of terms, variables and interdependencies that need to be explained.

Example: If you had asked me to choose a safe investment for retirement 20 years ago, I would have recommended an endowment policy. Why? At the time, this offered a guaranteed interest rate of four percent. This may not have led to great wealth back in 2000, but over the years it has been a solid form of investment. The interest rate policy has changed in recent years, which has resulted in falling interest rates. Four percent seems like a luxury today. The offers for a new endowment policy taken out in 2020 have a guaranteed interest rate of less than one per cent. Would shares or funds have been more successful or could they be today? And if so, which ones and with what risk?

The aim of the training programme is to enable participants to choose one or more pension provision options that suit their individual circumstances. Participants can use this knowledge to develop an understanding of their own pension provision and thus be able to better assess specific product offers.

What is the most suitable format for a training programme?

The learning offer can be carried out both analogously and digitally. The use of a digital tool would thereby open up several options:

• The participants will be introduced to the three pillars of the pension system and to the different types of pension schemes.
• The participants will learn the technical terms and their meanings.
• The participant can work through a number of scenarios as part of his or her biographical work.
• Participants can explore different investment forms with varying deposit amounts.
• This would also allow participants to try out different variables and their effects with respect to their own pension provision.
• These experiences, which are not dependent on any particular product, help participants to make decisions later on when they are ready to choose their own pension schemes.
• Instructors can also explain market mechanisms and their effects.

This training programme is intended to be product-independent and is not a substitute for financial advice.

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Motivation to start thinking about one's own pension provision early on

The paradox of dealing with one's own pension provision is that many people are actually very well informed about demographic change and about discussions surrounding pension reform. It's just that there's an obvious lack of action when it comes to addressing the issue. It's just that there's an obvious lack of action when it comes to dealing with the issue.

The goal for instructors and educational institutions is to reach their potential target group and motivate them to take action. The target group includes adults aged 18 to 60 - with a focus on younger adults. This could be provided as part of vocational training or in-company continuing education, for example, as well as through continuing education programmes offered by education providers. Mini-jobbers and volunteers could also benefit from such training opportunities within the framework of in-company training initiatives.

Easily accessible does not necessarily mean that there are no obstacles.

Even easily accessible training opportunities are not completely free of obstacles when it comes to this topic. In addition to monetary constraints, it is often the emotional aspect that prevents potential participants from taking part in a programme. The question is how can you make the necessity of dealing with the topic of pension provision attractive at a young age? It might be possible to reach the target group with a game if the corresponding technical infrastructure were available. A clear development chart in which variables can be entered and changed individually would help users to visualise the effects of small changes. This can be implemented in a simple application, e.g. as a table.

Conclusion

Ideally, financial provision for retirement should begin with the first job or vocational training. It would make sense to target young adults at an early stage with basic educational training regarding pension provision as well as with information events based on the latest developments. The aim of an educational programme should be to provide the participants with the skills to:

• identify the three pillars of pension provision
• understand pension insurance terms and pension information
• comprehend the aspects and concepts of occupational and private pension schemes
• understand market-oriented parameters and their impact on earnings development
• identify one or more suitable forms of investment to suit the participant’s own life situation
• recognise the sense and necessity to act.

Note: The topic of owning or renting as a part of pension provision will be covered in a separate blog post.

By the way

I collect bottles all the time, but only in the forest and for the sake of nature conservation. I spent many hours walking my dogs and collecting glass and PET bottles and cans at the same time last summer. I ended up earning a total of 145.08 euros when I took the bottles back for a refund. I'd rather not calculate my hourly wage though.

About the author

Susanne Witt is a sports scientist and journalist. She works at the German Institute for Adult Education as an editor for the wb-web and EPALE portals.

Quellen:

• Bundesministerium für Familie, Senioren, Frauen und Jugend (2020). Achter Altersbericht.
• Bundesagentur für Arbeit (2020). Beschäftigte nach ausgewählten Merkmalen.
• Deutsche Welle (Hrsg.) (2020). Altersarmut in Deutschland.
• Mania, E. & Tröster, M. (2014). Finanzielle Grundbildung – Ein Kompetenzmodell entsteht. In: Hessische Blätter für Volksbildung, 64(2), 136–145. Bielefeld DOI: 10.3278/HBV1402W136
• ZDF (2020). Fast jeder Fünfte von Altersarmut bedroht.