BLOG: Education or trust?

The pensions industry is always asking how it would be best to improve active engagement amongst savers, but it rarely asks if this is the right path to take.

At a recent conference, a panellist explained how a friend of theirs asked them to take care of their pension savings for them, in both the accumulation and decumulation stage.

This begs the question: would scheme members rather be educated enough to make decisions for themselves, or trust a professional to take care of their retirement income for them?

Communication with savers is often debated. Is there enough? Is educational material being communicated in an effective manner? How can we get people to take more interest in their pensions?

The questions are usually about how to educate people so that they can take more control of their pensions in the way that they see fit.

But evidence suggests that people don’t want to learn, so it seems like an exercise in futility trying to get savers to understand the complexities of the pensions world when they don’t have any interest or time to do so.

There is an argument that the industry's time would be better spent building trust in professionals to delegate all responsibilities to them, as they have the expertise and the time that members often don’t.

Of course, savers should never be discouraged from improving their financial knowledge, and it would still be vital that educational materials were made available to them, but giving them the faith to place their trust in professionals should give them a better chance of a comfortable retirement.

It may be argued that an individual’s freedom and choice would be undermined by having someone else in complete control of their pension savings, but in reality, delegating the responsibility could give greater freedom by saving time and effort that may have been spent on learning the ins and outs of the pensions industry.

Auto-enrolment has led to an extra 10 million people saving into pensions since its introduction, but most are just defaulting into company schemes and are actually no more actively engaged in their pension as when they weren’t auto-enrolled.

So, if people are not actively engaging anyway, they may as well place their trust in a professional that can attempt to achieve better outcomes for the member, while having peace of mind that their money is safe.

Increasing that trust is a path that the industry may want to consider and could lead to better retirement outcomes for those who don’t have the time or inclination to learn about this complex market.

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