There is a ‘cavernous’ trust and engagement gap among DC pension savers which is widest with younger people, according to new analysis of FCA data.
In the FCA Financial Lives Survey, DC savers were asked how much trust they had in their pension provider on a scale of one to 10 – with 36% answering with a six or less.
Consultanty firm Broadstone says these figures show a significant ‘trust’ gap, that widens with younger savers. It pointed out that among the 25- to 34-year-old cohort, 43% gave a figure of six or less. In comparison this figure was 32 per cent among 55- to 64-year olds, and just over a fifth (22%) for 65- to 77-year-olds.
The FCA also calculates an ‘engagement’ score, which found that over a quarter of adults (27%) had a very low engagement with their pension plans, with a further 24% quantified as ‘low engagement.’
Again this figure was far worse for younger savers, with almost half of those aged 18-24 said to have very low engagement with their pensions, and a third (33%) of those aged between 25 and 34.
Broadstone head of DC workplace savings Damon Hopkins says: “Funnelling millions more employees into DC pensions as soon as they start earning a salary was brilliant in kickstarting a new era of pension saving – but the sector now faces the downside of inertia.
“The FCA findings suggest a significant proportion of this new cohort struggle to trust the industry and have low engagement. This is a problem because we need these employees to be looking at their pension and working out how much they are likely to need in retirement so they can make the right decisions as early as possible.
“It is also a stark reminder of the variability in the quality of DC provision. Providers and employers must ensure they are at the top of their game when it comes to administrative procedures, delivering robust risk-adjusted returns and engaging with members. By doing so we can drive a virtuous circle of positive change within the industry as motivated, trusting pension members derive increasing value for money from their scheme.”