Public confidence in pensions has fallen to an all-time low just months before the Government starts automatically putting every worker into one, new research showed last Wednesday.
A survey for the National Association of Pension Funds (NAPF) found 54% of all employees are not confident in pensions compared to other ways of saving. 37% said they are confident, resulting in a Confidence Index of minus 17%.
This marks a record low since the Index was first run in 2007. It is also a sharp fall from minus 6% in September 2011, and from plus 5% in autumn 2010.
The NAPF is concerned that low confidence will undermine landmark rules starting in October to automatically enrol up to nine million workers into a pension. It is urging the Government and the industry to do more to build up confidence in pensions.
The NAPF believes the weak confidence stems from low trust in the pensions industry, particularly around charges and annuities. Squeezed household incomes and stock market volatility over the past year are also deterring people from saving into a pension.
The survey, run by pollsters Populus, also showed that a third (33%) of those who are eligible for auto-enrolment will quit the new pension. Asked why, 40% said they do not trust the pensions industry. This was up from 27% in October 2011 and is now the main threat to auto-enrolment. 35% said they cannot afford it, and 23% said they did not trust the Government on pensions.
On the day the annual NAPF Investment Conference opened in Edinburgh, Joanne Segars, NAPF Chief Executive, said:
“We have to bolster faith in pensions if our society is to pay for its old age. Auto-enrolment could be a huge step forward, but we are going backwards when it comes to confidence in the product.
“Quitting a workplace pension can mean losing tax breaks and employer contributions which are, in effect, ‘free money’. The benefits of auto-enrolment need to be more widely understood.
“The weak economy and rollercoaster stock market may have put many off pensions, but there are also growing doubts about whether a pension is good value, and these need addressing.
“People have to be sure that it pays to save. Pension charges can be fiendishly complicated and they must be made clearer. The annuity market has also disappointed many savers, and they need more help to get the best deal.
“Ministers said they would reinvigorate pensions but we have not seen much evidence of that. Once again we face the threat of the goalposts on tax relief being moved, which would be a further knock to savers’ confidence. The Chancellor must not fiddle with tax relief on Budget day.”
In its Budget Submission, the NAPF warns the Government against eroding consumer confidence by making further changes to pension tax relief. It also said the authorities should avoid more delays to auto-enrolment. Instead, the Government should focus on making the annuities system work better for consumers, and on reforming the state pension.
The latest NAPF Workplace Pension Survey also asked those eligible for auto-enrolment if they could afford to pay into a pension. 38% said they would struggle to pay for it, and would have to cut back on savings or expenditure. 16% said they would save less, and 15% said they would cut debt repayments or build up new debt.
