Recent research by Harris Interactive shows that there are significant barriers in engaging consumers in financial planning for later life.
As we all know, many people are currently struggling financially and, as might be expected, consumers (particularly those in the family lifestage segment), prioritise paying-off debts and meeting regular outgoings over making provision for retirement – the main reason those without a pension give for not having a pension is that they cannot afford it (the figure is highest amongst 35 to 44 year old) and our research shows this is the main reason people will opt out of auto enrollment.
Long term though, the issue is not just about getting people into a pension scheme it is about engaging consumers positively in financial planning for later life by encouraging them to review regularly the provision they are making and increase their contributions accordingly. People’s attitudes towards pensions are of great significance in achieveing this as, if people don’t believe in pensions, they won’t commit more to them even when they have the means to do so.
Our research shows that over half of those without a pension do not trust pensions to provide sufficient income in retirement and one in five of those with a pension share the same view. Distrust is caused by a number of factors including poor historical performance, the experiences of friends and family, unfavourable media coverage, the lack of guarantees and the erosion of trust in both government and financial institutions.
If auto-enrollment is to achieve its long terms goal of more private pension provision then these issues have to be comprehensively and consistently tackled through product design and communications to build consumer confidence and commitment.