Less than a quarter of consumers — 23 per cent — said they trusted long-term financial products, such as pensions, according to a survey of consumer group Which?.
This was lower than trust in day-to-day banking, at 40 per cent, and energy companies at 30 per cent, according with an article published on FTAdviser’s sister paper the Financial Times.
Which? surveyed 255 over-55s who had accessed their pension pots since pension freedoms come to effect.
The research found many of these savers became daunted and confused when it came to making a decision about what to do with their retirement savings, leading to inertia in some cases.
Less than half of consumers who took part in the survey who had purchased a retirement-income product from their existing provider said they stuck with them because it was the most convenient option.
Gareth Shaw, money expert at Which?, said: “We’ve found that trust in longer-term financial products — such as pensions — is worryingly low and that consumers are not getting the information they need to make good retirement income decisions.”
This lack of trust, combined with a pension "knowledge gap", leaves consumers disengaged and lacking detailed knowledge about the pension options available to them, he said.
This research comes two years after the pension freedoms were introduced, which allows people over 55 much greater choice over how they will spend or invest their retirement pots.
Since April 2015, when the new rules were introduced, £10.8bn has been withdrawn from pensions.
Which? also found that because trust was so low in long-term financial products, consumers felt there was little to be gained, and much to be risked, by switching providers to get a better deal.
“The [Financial Conduct Authority] FCA now needs to ensure that action is taken to help consumers make the right retirement choices,” Mr Shaw said.
“The annuity market failed pensioners in the past, so the FCA must now ensure that similar mistakes are not made with income drawdown products,” he added.
According to an FCA study published in July, almost three quarters – or 72 per cent – of pension pots that have been accessed are by consumers under 65.
The most popular option has been to fully withdraw the pot, with 53 per cent of pots fully withdrawn between October 2015 and September 2016.
The FCA also found that consumers who access their pots early without taking advice typically follow the "path of least resistance", accepting drawdown from their current pension provider without shopping around.
Tom McPhail, head of policy at Hargreaves Lansdown, said “there is a fairly widespread entrenched mistrust of pensions and this causes investors to act in ways which can be contrary to the long-term best interests both of themselves as individuals and of society more generally”.
He said: “Politicians, regulators and the pensions industry are jointly responsible for this state of affairs, and all have to take responsibility for rebuilding trust in the benefits and security of our long-term savings system.”
maria.espadinha@ft.com
