Retirement savers have a lack of faith in financial firms and relate investing to gambling with their cash rather than gaining a certain outcome.
Many savers regard the pensions industry with distain and consider companies greedy, corrupt and incompetent, according to a new study by the National Employment Savings Trust (Nest).
The shocking opinion consumers have of financial providers was revealed in research by Nest looking at how savers view investing with the British auto-enrolment workplace pension scheme.
Savers told Nest that they were looking for somewhere safe to for their money but feared financial losses because of their poor opinion of pension providers.
Nest concluded pension providers needed to change tack because they seemed to consider consumers had a more detailed knowledge about their finances and how pensions worked than was actually the case.
Negative feelings
The problems seem to stem from as far back as the Mirror Group’s Robert Maxwell robbing the company’s pension funds to shore up the business in the 1980s.
The issue was compounded by the financial crisis in 2008, and although employees in many larger companies are signing up for auto-enrolment, Nest is urging providers to explain pensions better to encourage more people to take part.
“Savers are very negative about pensions,” said Paul Todd of Nest. “They don’t trust pension companies and are worried that they could lose their money or end up with a much smaller amount than projected.
“This is especially worrying now people are gaining more control of their pensions and can decide how to spend their money from the age of 55.”
As an example, Nest found retirement savers were unconvinced even when shown graphs of stock market performance over the years to prove shares perform better than cash savings in the long term.
Alarm over losses
Savers were also alarmed when their funds returned a short-term loss.
Association of British Insurers (ABI) director general Otto Thoresen explained the report demonstrated how persuading consumers to save in pensions was a challenge.
“Companies need to understand how to explain the difference between the reality and myth surrounding pensions,” he said.
“It’s obvious ordinary people need to have a better understanding of how their financial savings work and we need to spend some time explaining this for them.
“This report is rightly critical of the gaps in the current system and gives us a starting point to work from.”
One of the problems is that many tend to let others handle their investments and control their retirement funds. It is your money and you should be the ultimate decision maker. Education about investing would help many understand their options. The site Retirement And Good Living provides information about retirement planning and saving/investing as well as many other topics including health, retirement locations, volunteering , travel and more,