Consumers 'disconnected' from pensions market
The pensions industry must do more to understand consumers' concerns and help improve confidence in the market, a new report has found.
While savers care "deeply" about their retirement income, consumers feel "disconnected" from the pensions market and don't trust providers to grow their pot in a responsible manner, according to the National Employment Savings Trust (Nest).
People want to be reassured that the industry is acting responsibly with their savings and an understanding of their concerns - something it is failing to do, the report found.
The pensions market is currently undergoing some of the biggest reforms it has ever faced. Since October 2012, auto-enrolment has seen a slice of employees' pay automatically put into a savings pot, with around only 10% of workers opting out.
And in this year's Budget, Chancellor George Osborne announced plans to increase flexibility in the industry, with retirees no longer obligated to purchase an annuity that would guarantee them an income for the rest of their lives.
However, most consumers don't understand the need for taking risk when it comes to their pension saving and associate poor performance with incompetence and wrong-doing – a perception that the industry must do more to change said the report.
Certainty for savers
Chief executive of NEST, Tim Jones, said: "As an industry we need to find innovative ways of providing greater certainty for savers, but without high charges and without foregoing inflation-beating growth. We also need to find ways to help consumers feel they are at the heart of a debate that is about helping them achieve their retirement goals."
What would you like to see your pension provider do to make you feel your savings are safe and it understands your concerns? Leave your comments below or email us at email@example.com.
The National Employment Savings Trust
NEST is a government organisation that aims to provide a simple and low-cost pension scheme designed to give its members an easy way of building up retirement savings. You have one NEST retirement pot for life, whether you change jobs, work for more than one employer at the same time, or leave employment. A NEST scheme won’t allow transfers in and out. From 2012, all employees will be obliged to join workplace pension schemes unless they actively opt out and NEST will be the default fund for those employers who do not create comparable alternative arrangements. It will be phased in from 2012 and all employers will be required to contribute 3% by 2017.
An increase in the general level of prices that persists over a period of time. The inflation rate is a measure of the average change over a period, usually 12 months. If inflation is up 4%, this means the price of products and services is 4% higher than a year earlier, requiring we spend and extra 4% to buy the same things we bought 12 months ago and that any savings and investments must generate 4% (after any taxes) to keep pace with inflation. Since 2003, the Bank of England has used the consumer prices index (CPI) as its official measure of inflation (see also retail prices index).
In exchange for any lump sum – usually your pension fund – an annuity is “bought” from an insurance company and provides an income for life. When you die, the income stops. Annuity rates fluctuate daily and depend on your sex (although from 21 December 2012 insurers will no longer be able to use gender as a factor when calculating annuities), age, health and a number of other factors, so you have to pick the right one and, once bought, its terms cannot be altered, so seek financial advice.