“Building customer engagement with their pension is a challenge all providers recognise but as this report clearly highlights action needs to be taken on many fronts if we are to address the gaps which exist between what people believe their pension plan should be able to achieve and what in reality, can be delivered through good scheme design and adequate levels of contribution.”
Pension savers do not trust the pensions industry and consider investment to be on a par with casino-style gambling, according to a report released by government body, the National Employment Savings Trust (NEST).
The report found that savers associated the pensions industry with corruption, complications and incompetence. Given that those concerned with pensions are at either passed or approaching the end of their arduous working life, they are undoubtedly seeking a steady, tranquil switch into retirement.
However, the extent to which pensions were affected during the financial crisis of 2008 has exacerbated saversí fears in recent times. Pressure on public expenditure led to governments raising pensionable ages and cutting pensions in payment. Moreover, the unpredictability of the market means public trust in schemes based on fluctuating stocks & shares is severely hampered.
These long-standing concerns are mirrored in NESTís findings, as the report shows that many consumers are still perturbed by Robert Maxwellís shameless pillaging of the Mirror groupís pension scheme back in the 1980s.
Additionally, the data showed people are afraid that sudden stock market plummets during the financial crisis would recur leaving them in the lurch, despite evidence showing that shares are more profitable than savings accounts in the long term. The short-term losses unavoidable in many investments only served to alarm a public, rendering the need to inform and educate potential savers on the topic of pensions more apparent than ever.
NEST say the findings are all the more disturbing given that auto-enrolment into workplace pensions was underway. The greater freedom entailed in this scheme seems superfluous if those being affected are mis-informed on the nature of pensions.
Paul Todd, head of investment policy at Nest, posited: “Auto-enrolment is a wonderful thing. It is giving people in the mass market opportunities they never would have had before, but we need to get over these very, very negative connotations that people have.
“It is a big challenge and it starts with the industry understanding people’s fears and not just shouting louder at them that they know best.”
Auto enrolment means that a portion of an employeeís pay is automatically transferred into a savings fund for their pension. This is supplemented by a minimum contribution paid by an employer and various tax relief measures.
The policy has proved successful since its inception in October 2012, with only 1 in 10 workers having opted out. Thus far, the biggest companies have joined the scheme and government intend to keep enrolment as high as possible so as to encourage small businesses and the wider employment sector to get involved.
Despite the millions of new consumers signing up to pension schemes every year, providers assume that customers are educated, well-briefed savers who are hardened by previous experience in other fields of investment. Their aforementioned fears seem to not be considered and this is reflected in the lack of consumer confidence spreading virally across the regions.
NEST chief executive Tim Jones said: “The new freedoms announced in the Budget have reaffirmed the importance of communicating effectively with members, encouraging better decisions and designing products that better meet savers’ needs.
“From next year the choices available to savers broaden considerably and the need for providers to reflect this is one the industry as a whole is investigating right now. To do this successfully we must understand consumers’ anxieties, aspirations and expectations; and design and communicate products in ways that are meaningful to them.”
Otto Thoresen, director general at the Association of British Insurers, said: “This report serves to remind everyone involved in the pension system that improving the understanding of how long-term savings works will be essential if we are to build on auto-enrolment and encourage more people to save more for retirement.