Rebuilding Consumer Trust in Pensions

Overview 1
Catalyst 1
Summary 1
Table of Contents 2
Table of figures 3
Table of tables 4
Introduction: Trust in the context of Financial Services 5
Defining the intangible: what is trust? 5
Datamonitor's Trust Process attempts to capture both the static and the dynamic elements of consumer trust 6
An improved level of trust can directly benefit customer acquisition, retention and overall performance 7
Consumers trust individual providers more than the industry as a whole 9
Trust is manifested in the market through a variety of means 9
Once lost, trust is hard to recover but is relative to the distrust felt for other organizations 9
Long queues outside branches were evidence of a loss of trust in Northern Rock 10
However, trust is a fickle emotion, subject to the relative distrust of others 11
The collapse of Fannie Mae and Freddie Mac is another example of the fallout from lost trust 12
A wider range of stakeholders must take responsibility for rebuilding trust and this is the real challenge for the industry 12
Industry bodies must accept their own responsibilities and avoid passing the buck 14
The Future Decoded 16
Trend: Consumers trust their pension providers less than their bank 16
Consumers trust their bank more than their pension provider, but they trust the wider pensions industry more than the banking industry 16
Insight: Consumers trust their own pension provider more than the overall industry 18
In the majority of countries most respondents had a significantly greater level of trust in their pension provider than in the industry as a whole 18
Trend: Paying more into their pension is not a priority for consumers 19
Reducing debt and expenditure are key priorities for consumers 19
Insight: Those without a pension are less likely to trust the pensions industry 20
Less than one third of consumers have a pension 21
Trend: Older consumers place less trust in the pensions industry 22
Trust in the pensions industry decreases with age but trust in pensions providers increases 22
Insight: Consumers in the age ranges 35-44 and 50-64 are more financially informed 23
Insight: Older consumers are more concerned about the way their provider has managed the crisis 24
Those in the accumulator stage are most likely to distrust the pensions industry more than they did before the credit crunch 25
Insight: Older consumers are more likely to say that their pension is their responsibility 26
Trend: Trust in one's pension provider or the pensions industry as a whole has little discernible impact on the size of consumers' average monthly payments into their pension 27
There is no consistent relationship between the average monthly pension payments and the level of trust shown in one's pension provider 27
There is no clear link between monthly savings and the pensions industry as a whole 28
Insight: Lifestyle and affordability have had a major impact on how much consumers pay into their pension 29
Prior to the credit crunch consumers in the US and the UK in particular have focused on a life of credit 29
People are not prepared to take on higher pension savings during a market downturn 30
Affordability and short-term views act as further barriers to pension savings 30
People are not saving for the future, assuming that they will be looked after by the buckling state system 31
Young people are discounting the value of importance in building up retirement savings 31
Insight: Those who pay into their pensions more regularly are less likely to trust their pension provider 32
Trend: Consumers are uncertain from where they will get their retirement income 33
Close to half of all consumers are not sure from where they will get their retirement income 34
Insight: The less trust consumers have in their pension provider the more unsure they are where they will get their income from in retirement 34
Insight: Consumers who hold their savings with the government are least likely to fear for their income in retirement 35
Insight: Consumers who keep up with the latest developments in the news are more likely to trust the pensions industry 36
Action Points 38
Action point: Pension providers should aim to establish more of a presence in emerging markets 38
Buying a stake in an existing company is a good way of entering a new market 38
An outright takeover provides a pension provider with greater control upon its entry into a new market 39
Action point: Education of younger consumers about the importance of a pension is vital 39
Pension providers need to make more of an effort to tailor their offering to the young 39
Target the young with effective communications 40
A multi-network strategy can help providers to gain business from 'aspirers' 40
Action point: Engage in more regular contact with their customers by offering more advice 41
Financial health checks can be used to help consumers improve their financial situation 41
Find innovative methods in which to offer advice to consumers 41
APPENDIX 43
Supplementary data 43
Definitions 51
Personal pensions 51
Stakeholder pensions 51
Group personal pensions 51
Methodology 51
Further reading 53
Ask the analyst 53
Datamonitor consulting 53
Disclaimer 53
List of Tables
Table 1: Trust in own bank compared with trust in own pension provider by country 43
Table 2: Trust in the banking industry compared with trust in the pensions industry by country 44
Table 3: Trust in the pensions industry compared with trust in a pension provider by country 45
Table 4: Average likelihood of action over the next six months 45
Table 5: Level of trust in the industry for different pension types by number of pensions 46
Table 6: Percentage of the population with a pension 46
Table 7: Level of trust in pensions by age group 46
Table 8: Use of newspaper to help inform financial decision making by age group 47
Table 9: Nervous about pension value/maintaining value of pension after credit crunch by age group 47
Table 10: Trust the entire pensions industry less than before the credit crunch by age group 47
Table 11: Responsibility for income in retirement by age group 48
Table 12: Average level of monthly savings compared with trust in pension provider by country 48
Table 13: Average level of monthly savings compared with trust in pensions industry by country 49
Table 14: Trust in pension provider and industry by regularity of payment 49
Table 15: % who agree that they know where they will get their income in retirement from 50
Table 16: Extent of consumer belief that they know where they will get their income in retirement compared with trust in provider 50
Table 17: Alternative sources of savings versus where get income in retirement 50
Table 18: Financial intelligence compared with trust in the pensions industry 51
List of Figures
Figure 1: The Datamonitor Trust Process 6
Figure 2: Increased trust helps to build up customer acquisition/retention and improve performance 8
Figure 3: Customers queuing outside Northern Rock as they lose their trust in the bank's business model 11
Figure 4: Consumers globally feel that government and businesses share responsibility for the crisis 12
Figure 5: 53% of consumers globally feel that government should be held most responsible for solving the financial credit crisis 13
Figure 6: 64% of Indonesian consumers believe government and regulators are most responsible for solving the financial credit crisis. 14
Figure 7: In the BRIC countries and Singapore in particular banks are significantly more trusted than pension providers 17
Figure 8: The pensions industry is more trusted than the banking industry 18
Figure 9: Consumers trust their own provider more than they trust the overall pensions industry 19
Figure 10: Over the next six months consumers are most likely to agree that they will reduce their credit card debt 20
Figure 11: Those without pension products are less likely to trust the industry overall 21
Figure 12: Almost 70% of consumers do not have a pension 22
Figure 13: Trust in the pensions industry is lowest between the ages of 50 and 64 23
Figure 14: The age group 50-64 is a close second to 35-49 in terms of the extent to which they keep up with financial news to make more informed decisions and make more of their money 24
Figure 15: Respondents in the age groups 35-49 and 50-64 were most likely to be nervous about the value of their pension and feel that their provider could have done more to maintain its value 25
Figure 16: Those in the age group 50-64 are most likely to trust the entire pension industry less than they did before the credit crunch 26
Figure 17: Consumers' belief that their pension is their own responsibility increases with age 27
Figure 18: Trust in your pension provider has no discernible relationship with average monthly savings 28
Figure 19: Singapore and China have the highest value of average monthly savings 29
Figure 20: Affordability is a strong barrier against saving for a pension 31
Figure 21: Trust levels decline for those who contribute to their pension more regularly 33
Figure 22: More than 45% of consumers agree that they are not sure from where they will get their retirement income 34
Figure 23: Those who disagree with the statement that they do not know how much they will obtain in retirement have the strongest trust in their provider 35
Figure 24: Those with a government-run savings scheme are most likely to be sure where they will get their income in retirement 36
Figure 25: If consumers keep up with the news or avoid it completely they are more likely to trust the pensions industry 37
Figure 26: Like other Spanish banks BBVA makes a big effort to connect with the young 40
Figure 27: Lincoln Financial Group offers an innovative way of disseminating financial advice 42