Poor investment performance is associated with embezzlement, and market downturns are blamed on bad fund management, according to wide-ranging research into consumer attitudes published by Nest today.
The report says many consumers still see the Maxwell scandal as the most enduring image of the pensions industry, creating a consensus that pensions are insecure and open to corruption and mismanagement. As well as eroding consumer confidence, these stories leave people confused as to how pensions work, the report says.
The research also concludes that inertia will not keep individuals saving in pension schemes if there are prolonged periods of poor performance and highlights the key concerns savers have with their pensions outlines how pension providers must tailor products and communications to respond to them.
Research into the behaviour of 25,000 DC scheme members over the period covering the start of the financial crisis of 2008 found 15 per cent stopped contributing altogether and 6 per cent reduced their contributions, with 46 per cent making some form of change to their savings arrangement. Some members switched funds.
Nest’s research also found very low appetite for volatility in pensions and low levels of understand of the reasoning or need for taking risk with their retirement savings
Consumers feel ‘disconnected’ from pension schemes, but historic disengagement shouldn’t be interpreted as indifference, as consumers care deeply about building a retirement income, the report found.
It also found that the pensions market is undifferentiated for most consumers and they have difficulty in identifying different product features or the rationale for them.
Nest chief executive Tim Jones says: “Automatic enrolment continues to gain momentum with over 3 million more people saving for their retirement as a result. As an industry we are increasingly challenged with meeting the needs of this new and growing generation of savers and developing products that are aligned with what they want and need. Our research suggests that a key missing element is how we bring this new generation into a conversation that has previously excluded them.
“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.
“As an industry we need to find innovative ways of providing greater certainty for savers, but without high charges and without foregoing inflation-beating growth. We also need to find ways to help consumers feel they are at the heart of a debate that is about helping them achieve their retirement goals.
“We hope publishing these findings will help us, and others, advance design, engagement and innovation to instil more trust and faith among the millions of new pension savers automatic enrolment is creating.”