Confidence in pensions takes slide

CoinsWorkers' confidence in pensions has hit a new low just months before they are automatically placed into schemes, a study has found.

More than half of workers (54%) said they were not confident in pensions compared with other ways of saving, compared with just 37% who were, the National Association of Pension Funds (NAPF) found.
The overall confidence level of minus 17% is at its lowest point since the NAPF first began carrying out the study in 2007 and has dropped from minus 6% last autumn.

The findings come ahead of a landmark overhaul of the pension system with the automatic enrolment of up to nine million people into schemes, beginning this October with larger firms.

Almost four in 10 of those eligible for auto-enrolment told the NAPF Workplace Pension Survey that they would struggle to pay into the scheme, while a third said they will quit the new pension.

Asked why they plan to leave, 40% said they do not trust the pensions industry, a rise from 27% in October 2011 and the main threat to auto-enrolment, the NAPF said. It said there was a particular lack of trust over charges and annuities.

The NAPF warned that the squeeze on household incomes and stock market volatility over the past year have put people off saving into a pension.

Joanne Segars, NAPF chief executive, 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."

Pensions minister Steve Webb said: "We entirely agree that more needs to be done to boost confidence in pensions. We're working on plans to simplify the state pension, providing a firm foundation on which to save ahead of the introduction of automatic enrolment.

"And we've introduced Nest, a low charge, good value scheme that will be a real benefit to savers on a low income, alongside a range of other measures that will ensure good value for money. Workplace pensions are one of the few ways of saving that come with an employer contribution - a major advantage of saving in this way."
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