A pension fund survey has found high levels of mistrust and disengagement with workplace pensions. One third of those eligible said that they intended to opt out if auto-enrolled.
Pension schemes shunned
The National Association of Pension Funds (NAPF), whose members operate 1,200 schemes, have reported a fall in confidence in using a pension scheme to save for old age. Its latest survey found that 54% of employees were not confident in pensions compared to other ways of saving.
On the eve of auto-enrolment, which starts in October 2012, the poll suggested that 33% of those eligible intended to opt out.
Of those, 40% said they did not trust the pension industry and 35% said that they could not afford to pay into a pension.
Workplace pensions offer ‘free money’
Commenting on the survey, NAPF chief executive Joanne Segars 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.
‘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.’
From October 2012 onwards, employees aged 22 or above, who earn more than £7,474 will start to be automatically enrolled into a workplace pension scheme. Large employers will start the process, with smaller firms following in subsequent years.
Although joining a scheme will become compulsory, individuals are able to opt out if they don’t wish to continue to belong to it.
Transparency and low charges vital
Which? pensions expert, Ian Robinson, said: ‘The high level of mistrust revealed by NAPF shows that people will need convincing that joining a scheme is worthwhile. Tax relief on pension contributions and the boost you get from your employer’s contribution make this an effective way to save for the long term.
‘Putting money aside is never easy, but joining a pension scheme should pay off for most people. It’s important that schemes deliver good value for those who join them however, so transparency and low charges are essential.’
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