Can you fathom financial words and phrases?

US politician Donald Rumsfeld was not talking about our personal finances when he made his comments about "known knowns".

But much of the vocabulary used when we make decisions about our financial well-being can be regarded as "unknown unknowns" - that is, the things we don't know we don't know.

In other words, much of the language used in finance is confusing, and this could be costing us money.

Now the Nest Corporation, which will oversee pension savings for millions of workers, has called on the pensions industry to use clearer words and phrases when talking to people about saving and investing for retirement.

The call comes after its research found people overclaimed how much they understood.

Findings

A series of terms in common usage in the pensions industry were put to UK workers who earn up to £35,000 a year to see whether they understood these words and phrases.

In the poll of nearly 2,000 people no more than 56% said they completely understood the meaning of an individual phrase.

Yet they were being over-optimistic.

The Office of Fair Trading is conducting an investigation into small print

One of the terms people were tested on was "lifestyling". Put simply, this is when investments are switched towards less risky areas as the policy holder approaches their retirement.

But of those who said they understood the term, only around 20% were actually able to provide an explanation.

"We need to make sure that we as a pensions industry are communicating in the clearest and simplest terms with people, so that they understand why it is good to save and what they can expect from their pension," says Helen White, of the Association of British Insurers.

Interest

It is not just with pensions that the jargon affects people's knowledge and understanding.

For example, one in seven mortgage holders do not know what type of interest rate they are paying on their mortgage - fixed, variable, tracker or discounted, according to a recent survey by the Consumer Financial Education Body (CFEB).

Providers of financial products argue that regulations often dictate the language used in financial paperwork. They say there is no competitive advantage in baffling their customers.

The behaviour of consumers themselves is also relevant, according to Damon Gibbons, chief executive of the Centre for Responsible Credit.

They need to read the guidance that explains if their personal circumstances change they could suffer financial losses - even if they feel it is something that will not happen to them.

"People tend to be optimistic - it gets us out of bed on a Monday morning," he says.

Basic banknotes all contain some important financial language

"But when we are buying goods and services, we do not really think through how they might change if things go wrong."

This view was backed up by Bernadette Kamleitner, a senior lecturer at Queen Mary University in London, during a discussion that formed part of the Office of Fair Trading's (OFT's) investigation into small print.

"Consumers do not want to find negative information in the contract that would suggest their selection of the product was a poor judgment," the OFT reports.

Quiz

The OFT is studying whether consumers are deliberately misled by the contracts offered by businesses. It will report its findings at the end of February.

Yet, the debate about financial language - or jargon of any kind - has been swirling around for years.

At the British Library in London, there is an exhibition about how the English language has evolved, so how would visitors respond to the BBC News challenge of defining five words and phrases relevant to personal finances?

Nobody was able to define all five - Individual Savings Accounts, an annuity, negative equity, a bond, and trivial commutation.

Those who came close tended to be among the older generation, a conclusion also drawn from the research commissioned by Nest - the National Employment Savings Trust.

Logical guesses were common, especially by those who knew that an annuity was something that referred to an annual payment.

One offered the answer "James" to the question: "What is a bond?" and, unsurprisingly, the phrase "trivial commutation" was met with many a furrowed brow.

Hit in the pocket

But does it really matter that not everyone understands these words and phrases?

Well it could if it meant that people were losing money because of the confusion caused by jargon.

"Making an uninformed purchasing decision could put you at a disadvantage later down the line," says Catherine Wolthuizen, consumer policy expert at the CFEB.

She says that people in the UK have become more aware of banking and personal finance issues as they have been in the news so much in recent years.

"But awareness does not always equal understanding," she says.

The group has created the Moneymadeclear website to try to bring clarity to the jargon of finance.

To help people when it comes to pensions, the Nest Corporation has developed a phrasebook aimed at offering clear communications about pensions.

A game, featuring Nest's unnamed bird, has also been developed and is also supposed to appeal to those who might be coming to pensions for the first time.

Pensions Minister Steve Webb says that workers and employers alike find pensions very complicated.

The same could be said for financial products and services as a whole.

So it may be some time before the things we don't know we don't know, become known knowns.