2 min

How financial literacy affects pension provision

Study by St. Pölten University of Applied Sciences and Lucerne University of Applied Sciences and Arts

Financial Literacy is becoming more important. Responsibility for pension provision is increasingly being shifted from the state to the private sector. At the same time, the possibilities for investment are numerous to the point of being incomprehensible and individual financial products are quite complex.

Financial Literacy has recently become an issue among economic, social, language and communication researchers. "Studies show that financial (in)-competence diverges significantly between countries as well as within social groups. We know that these differences have a strong impact on pension provision as well as investment and information behaviour and as a result they can promote or endanger individual and social prosperity", said Monika Kovarova-Simecek, UAS Lecturer in the Department of Media and Economics at St. Pölten UAS and co-author of the study.

Financial Literacy

Financial Literacy is on the one hand knowledge and understanding of financial products, financial markets and essential financial connections, and on the other hand the ability to apply this knowledge. This is not a matter of highly professional financial expertise, but rather, basic knowledge needed for a well-managed daily financial life. Individuals who are "financially literate" can for example, assess how inflation affects their savings, which financial products are useful under current conditions, or how changes in exchange rates affect foreign currency loans. Others cannot do this and run the risk of making mistakes.

For the study, 442 people were surveyed (336 in Austria, 106 in Switzerland). The study showed that the financial literacy of the Austrian labour force is not particularly high and they tend to overestimate their knowledge. While in Switzerland more than half of all those surveyed were able to answer all 16 questions correctly; it was only 35.5 percent in Austria. This also appears to have an effect on plans for private pension provision. More than 50 percent of Swiss are concerned about this. In Austria, almost two-thirds of those surveyed do not have any additional pension plans.

Different financial thinking of men and women

Differences also show up among different population groups: women and young people as well as people with a low income and a low level of education have significantly worse financial literacy. Less surprising is that employees in the financial sector have better knowledge in this area. Nevertheless, they do not take measures for private pension provision more frequently than employees in other economic sectors. However, older people are more likely to plan in advance than younger people.

Promoting financial literacy

Because the pension system is increasingly shifted from the state to the private sphere, the authors of the study recommend promotion of financial literacy. "Considering the international differences, it makes sense as early as possible to integrate financial and economic topics into the education system, such as basic knowledge of current financial products, their risks and potential returns", said Kovarova-Simecek.

The study was carried out by the research group Financial Communications in the Department of Media and Economics in cooperation with Lucerne University of Applied Sciences and Arts, and with the support of Tatjana Aubram, graduate of the Media Management study programme at St. Pölten University of Applied Sciences.


Tatjana Aubram, Monika Kovarova-Simecek, Gabrielle Wanzenried (2017). "Financial Literacy and Pension Planning - A Comparative Study for Austria and Switzerland." SSRN Electronic Journal. Doi: 10.2139 / ssrn.2892726.
Download: http://dx.doi.org/10.2139/ssrn.2892726