Lack of trust in pensions negatively impacting member savings

Industry research has revealed concerns about the negative impact of a lack trust and confidence in pensions, after Trafalgar House research found that over a third (34.3 per cent) of savers have very little to no trust in the industry.

The findings were announced as part of the provider's newly launched Trust & Confidence Index, which found a public trust score for pensions of 4.46 out of 10, with a further 29.6 per cent of people stating that this lack of trust is having a negative impact on their savings.

In contrast, just one in nine people stated that their trust in the industry had a positive impact, either very or fairly, on how they felt about saving for retirement.

Trafalgar House client director, Daniel Taylor, highlighted the research as a "red flag", arguing that the industry must "stand up and take notice" of the negative impact distrust is having on savings.

"Pensions needs to perform for a modern member with a service fit for 2020 and beyond - and do so in a transparent and encouraging way that lets members know we all have their best interests at heart," he added.

Whilst the report found that distrust had grown post-Covid, increasing from 33.4 per cent to 35 per cent of respondents, it emphasised that this is not a trend exclusive to pensions, with wider confidence in financial services also falling.

This in turn has seen pensions improve its comparative trust against seven out of eight industries considered in the index.

The pandemic was also found to have impacted confidence in saving levels, with those members believing that they will have less than needed in retirement increasing from 69.3 per cent prior to the pandemic to 72.8 per cent.

On average, just 20.6 per cent of members felt they had the right amount saved for retirement, whilst a further 14.9 per cent of members were unsure if they had enough for retirement.

Despite this, the report also found that members showed more confidence in the role they were playing in their retirement.

For instance, it found that 56.1 per cent had confidence that they made the right choices for where their pots are held and 55.3 per cent had confidence in the investments chosen, whilst 49.5 per cent had confidence in the amount they were saving.

Considering this, Trafalgar House noted that the results seemed to suggest that savers do not feel any blame for any lack of money, understanding or trust towards their pensions.

However, clear communication was viewed as a key factor in rebuilding trust by 89.8 per cent of members, whilst accurate information and fast responses were highlighted by 92.5 per cent and 90.1 per cent respectively.

This compared to just 41.3 per cent for face-to-face contact, and 48.9 per cent for frequent communication.

A self-service website was viewed as important by 77 per cent of members, which Trafalgar House stated may show that people value being able to make decisions and changes all in one easy place, rather than relying on the industry to provide them.

Commenting on the findings, Taylor stated: “Trust must not be assumed, it must be earned.

"It should develop over years of consistent delivery on promises and providing valuable support and advice, not through an expected confidence that the industry knows what it is doing.

"We often talk about engaging with members to promote greater levels of saving, but if they lack trust in us, there will be an impenetrable barrier that will stop any engagement message getting through."

He concluded: “Like it or not, members’ expect their pension providers to take a great deal of responsibility for helping them build their retirement savings.

"Members’ have shown greater confidence in decisions they make themselves, whether that’s because of a lack of understanding of other options or simply feeling they are doing all they can reasonably afford to do.

"It’s clear from the research that instead of telling people how things are done, we should be asking them about what works for them and what support they need from us.

"Only then will we regain their trust and build their confidence in our ability as an industry to support them in retirement.”

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