Steph McGovern: Hey, guess what? In about 50 years you can retire. Yeah that’s right just half a century to go and you can put your feet up and relax. But, have you ever wondered, when you stop working, what do you live on? You won’t be getting paid anymore so where does your money come from?
Steph McGovern: Well normally it comes from something called a pension and a lot of people will get that from the government, called a state pension.
Steph McGovern: If you’re at school now you’ll get it when your 68. Now, you’re allowed that money because while you were working you will have paid something called National Insurance. Now, normally your employer will take it out of your salary each month, so you might not even notice, but also time spent bringing up children or claiming some benefits also counts towards it. Now some people want more than that so they put money aside in the years that they’re working. Some jobs will help you to save for a pension too and there are different ways they do this.
Steph McGovern: One way is giving you a proportion of your annual earnings every year after you’ve retired. In other jobs they might take money out of your pay and put it in a special savings account every month. This gives you a pot of cash when you retire. Both of these pension plans mean that you earn less now, but you’ll get more money later when you’re older. Yet some people think that they would rather put the money towards having a nice lifestyle now or saving for a house.
Steph McGovern: And for most young people retirement might feel like ages away. They might have never have even thought of it. So everyone is automatically entered into a pension scheme from the age of 22, once you start earning a certain amount every year. Unless you tell them to stop, your employer will put part of your pay into the pension scheme. A minimum of 5%, they’ll also give you some of their money too. They’re giving you money for free but if you opt out, which you can, you’ll lose that extra money from your employer.
Steph McGovern: But if you do start saving early it makes it much easier to save for retirement. So let’s say you decide you want to retire on £20,000 a year. If you start saving at 25 you would have to save around £250 a month. But if you wait another 10 years, until you're 35 before you start to save, you’ll need to save around £400 a month to get that same income in retirement. So it might be a long way away and it might not be for you but the earlier you start the easier it will be to save for a comfortable retirement.
Video summary
Steph McGovern tells you all you need to know about pensions before you leave school and go on to work or study.
She explains that the National Insurance scheme takes money directly from your pay to fund a state pension for when you retire.
There are workplace pension schemes too. Everybody over the age of 22 in a workplace gets put into a scheme when they start their job, unless they opt out. It's smart to stay in a workplace scheme, because your employer puts money into it as well as you.
You can also choose to pay into your own personal pension scheme, so there are lots of ways to save and make sure you'll have money to live on in your old age.
Teacher Notes
Choose from a selection of activities to help students learn more about pensions.
Before watching
Questions to get the class thinking and talking…
- What is a pension?
- When should we start saving for a pension?
- What is life like for people who don't have a pension?
Establishing a pension is a source of money people rely on when they are too old (or too ill) to work.
Using the film
Tell students they will devise a quiz based on information in the film clip. Encourage them to take notes as they watch.
Pause the clip from time to time and challenge students to summarise what they have seen. This allows you to deal with students' questions as they arise.
You may wish to view the clip twice: once straight through and once with pauses.
After watching
- Hot seat - Ask the question 'What do you think living on a pension will be like?' Some students may think it will be liberating not to work, others that it will be challenging to live on a fixed income.
Invite students into the 'hot seat' to play a future version of themselves at the age of 68. Encourage their classmates to interview them.
What are their thoughts as they retire? What are they looking forward to? What are they dreading? Are their priorities different from when they were at school? What advice would the Future You give to the Present You?
Activity ideas
Glossaries - Students could compile glossaries of financial terms used in the film clip, along with their own definitions. This encourages them to clarify their understanding of key vocabulary. Terms might include: 'salary', 'retire', 'employer', 'government' and 'state pension'.
Quiz questions - Using a true-or-false format, students could compile quiz questions and answers based on their viewing of the film. For example: 'True or false? The state retirement age is 55. (False)'.
Role-play - Ask students to work in groups of three, to take on the roles of someone in a new job and two workmates.
On the newbie's first payslip, £150 has been taken in contributions to a work-place pension. One workmate suggests opting out of the pension scheme to 'keep more of your earnings'. The other workmate disagrees.
What arguments would the workmates use? And what would the new worker decide? Students could present their improvised scenes to the class.
- What if? - Ask students to list some 'What If?' questions about pensions, that have arisen from the lesson.
Prompt them with one or two of these questions: 'What if I lose my job, what happens to my pension? What if I don't get a job? What if I want to work for myself? What if I work in a zero hours job, like a despatch rider, where there isn't a pension scheme? What if I want to travel? What if I don't want to retire? What if I get sick and can't work?'
Challenge students to search online for answers to these questions and share them with the class.
Supported learning and SEN
As an alternative to text-based activities, students could design a poster or set of social media posts to inform young adults about the advantages of workplace pensions. With appropriate support, students could come up with slogans, graphics and images to illustrate their message.
Closing the lesson
Divide the students into teams for a true-or-false quiz, based on the questions they devised.
This is a fun and snappy way to revisit the lesson material, reinforce the learning and check the students' understanding.
Follow-up task
Steph McGovern says a 25 year-old who wants to retire on £20,000 a year would need to save £250 a month into their pension. Ask students to devise a monthly budget for this 25 year-old, assuming he or she earns the current average salary for someone this age of £1,800.
Students could estimate the monthly cost of housing, food, bills, transport, etc. They should budget for council tax, income tax at 20% and National Insurance. Is saving £250 a month into a pension a realistic option?
This activity requires substantial research. It might work well as a task started in class and completed in a private study session, or as homework.
This short film meets and extends curriculum requirements for financial literacy at:
- Key Stage 3 and Key Stage 4 in England (Citizenship and Personal, Social, Health and Economic Education)
- Wales (Mathematical Development and Personal and Social Education)
- Northern Ireland (Mathematics and Numeracy and Learning For Life and Work)
- Third and Fourth Level and the Senior Phase in Scotland (Mathematics and Numeracy, Social Studies and Learning, Life and Work).
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