The chief executive of the National Employment Savings Trust said: “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.”
In a 68-page report, Improving Consumer Confidence in Saving for Retirement, Nest looked at what lies behind consumers’ attitudes to pensions, their appetite for greater certainty of outcome and what they are prepared to sacrifice to achieve their objectives.
The research revealed that while more people than ever are saving in a pension, savers feel “disconnected” from pension schemes, they are confused about how they work and concerned they will fail to deliver.
According to the research, in consumers’ minds pensions are already guaranteed and discovering this is not the case was ‘shocking’ to many.
However, most consumers of DC pensions did not understand enough about the products or approach to know what were the right questions to ask.
Those who were prepared to pay higher charges for greater certainty of outcome were very much the minority, and most were not happy about having to pay.
The research also suggested that innovations in product design could aim for a better balance between cost, protection and high outcomes, thereby increasing consumer confidence. Reassurances about risk and empowering members to control their outcomes by engaging with their savings are other ways to minimise consumer concerns.
Mr Jones added: “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.”
| Key Recommendations |
Savers could benefit from practical information that: i) is accessible and straightforward ii) doesn’t result in further or unnecessary worry iii) corrects misunderstandings about investment iv) provides the ‘real’ picture of what goes into their pot, what happens to their pension contributions and what they can do to influence better outcomes. |
Adviser View
Andrew Hursthouse, director of Sheffield-based Pension Planner, said: “Pensions are a form of investment but are more tax efficient so they should give people confidence. However, people do want a greater understanding but if they are getting embedded with detail, they are in danger of information overload which can weigh people down and lead to poor decision-making. So it is up to providers and advisers to advise accordingly to simplify the process.”
