A recent survey by Which? magazine found that the general public has greater faith in Banks than it does in pensions. Banking services are trusted far more than any long-term savings product such as pensions, by a margin of 40% to 23%.
Given that, since the 2008 financial crisis, banking worldwide has suffered a huge loss of credibility it is something of a blow to those of us in the life and pensions sector to find ourselves less trusted by consumers.
The pensions industry has been beavering away providing sums for retirement whilst the banking sector inflicted great damage across society. Indeed, one of the biggest issues for the pensions sector is that those very banks whose shares used to form the centrepiece of any cautiously managed fund actually sank so badly that the security of the pension funds took heavy collateral damage.
Yet Which? has recognised that the complexity of the pensions regulatory system and the lack of understanding of it by the average consumer contributes hugely to this lack of confidence in the industry.
The life and pensions sector need to get more active in promoting the value of their products and the security it provides for so many millions of people in retirement. It should not be afraid to blow its own trumpet about the security it provides. Putting far more emphasis on the difference between long-term and short-term saving would be a good start as would making a stronger case to the government for simplifying the whole pensions structure in order to make it clearer what people were buying.
Too many people expect a private pension to be like a state pension. Unfortunately for direct contribution pension owners, nothing like that level of certainty can be provided. Therefore, explaining the differences and getting more examples out there of people who’ve successfully saved across their working life and are now benefitting from it in retirement should be pushed into the media. Too much negative news is constantly clouding out the fact that the vast majority of those who save in pensions benefit hugely during their retirement years.
Asking people to save for 40 years or more is a huge commitment. The only comparable one is a mortgage but people who take out a mortgage live in the benefit every day and can clearly understand the value. We need to get the same clarity of benefit across to the public when asking them to make the same level of commitment.
And possibly the key thing is to avoid over-promising. Nothing destroys trust as quickly as a promise not delivered. Therefore, making sure consumers understand the full range of outcomes is vital to restoring trust in their pensions. If this can be achieved, long-term saving might be back to stay and trust in the products should get the much higher rating it deserves.