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When IBM announced an overhaul of its pension plan for employees in America last week, it joined a parade of employers that are shifting more responsibility for saving for retirement on to workers. For many Americans, of course, this is nothing new: millions of them have been managing their retirement assets in individual accounts for years. Nevertheless, in both America and Britain the closure of paternalistic corporate defined benefit programmes, in which pensions depend on earnings and years of service, is acceleratingeven at healthy companies such as IBM. To the extent that this creates and encourages individual choice and responsibility, it is something to welcome rather than to fear. Many other countries, facing huge statepension obligations, would also like to see their citizens assume a bigger role in providing for their own retirement. Even so, the trend raises an important question: how much do people due to take on these new responsibilities know about basic financial concepts? The answer seems to be; not much, and less than they think they do. Studies show that many people overestimate their knowledge of everything from inflation to risk diversification and compound interest. One survey in Australia found that 37% of people who owned investments did not know that they could fluctuate in value. In America 31% did not know that the finance charge on a credit-card-statement is what they pay to use credit. Britains Financial Services Authority will release the results of its own survey on financial literacy in the next month or two. | 
