Only one in nine people would trust the financial services industry to look after their pension pot, according to new research from Which?.
Our new survey reveals an inherent lack of public trust in the industry that could end up managing the financial futures of millions of people.
In November last year, the Pensions Commission suggested a national pension savings scheme (NPSS) should be set up to help people on a lower or an average income save towards their retirement. Which? had long called for such a scheme, and backs the proposal.
Average earner could lose thousands of pounds
The Association of British Insurers (ABI) has also put forward its own version of the scheme. But Which? estimates the charges could be more than four times higher than the Pensions Commission’s scheme. This would leave the average earner thousands of pounds worse off over the course of their lifetime.
Our concerns are mirrored by the public. We asked working people and those seeking work which type of organisation they would most trust to manage their pension.
Forty per cent had most trust in an independent body, and a further 20 per cent would have most confidence in the government. But only 11 per cent – one in nine – felt their savings would be safest with the financial services industry.
‘Lost the trust of the public’
Peter Vicary-Smith, Chief Executive of Which?, said: ‘The government now faces a clear choice. Does it choose a model like the NPSS which is cost-effective and has the clear backing of consumers? Or, does it choose a model like that proposed by the ABI which is likely to cost around two or three times more than NPSS and offers more of the same from an industry which has lost the trust and confidence of the public.
‘The main aim of any future pension scheme should be providing for futures rather than boosting industry sales. NPSS would see an independent body run a scheme which would make markets work for consumers with a target charge of just 0.3 per cent a year, delivering better returns for consumers and taxpayers.’
When shown the details of how the NPSS model would work, it was much more trusted than the industry model. More than half (54 per cent) decided they would trust it the most and only 18 per cent felt the same way about the industry model.
Peter Vicary-Smith added: ‘Ceding control to the financial services industry on this essential issue would create a hostage to fortune. We have a once in a generation opportunity to create a sustainable pension system which has the trust and confidence of consumers. The industry failed to deliver on the government’s flagship stakeholder pensions policy and it would do the same to these proposed reforms.’