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Rebuilding Consumer Trust in Pensions

Datamonitor
July 28, 2009
16 Pages - SKU: DFMN2404993

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Introduction

Consumer trust in Financial Services is at an all time low. In order to attract consumers' money banks and other institutions must first rebuild trust. The importance of trust varies across industry and region but for all FS players trust is a crucial element in retaining and attracting customers.

Scope

Using global consumer data from our FSCI survey this report identifies the extent to which trust has been lost.
The report analyses the causes of this shift & identifies strategies that can be employed to rebuild trust and attract & retain pensions customers.
The report discusses what trust means in the context of pensions and what it means for customer acquisition and retention, as well as performance.
A number of key trends are highlighted that describe the interplay between trust, attitudes and behaviour in the wake of the credit crunch.

Highlights

During the financial crisis, much emphasis has been placed on how consumers have lost their trust in the financial services industry and in their bank in particular. Nonetheless, despite the current banking crisis, consumers' own banks have managed to maintain a larger degree of their trust than pension providers.

People have not been prepared to take on additional longer-term financial risks during the financial crisis, even if it could have resulted in potentially higher return, risking the likelihood that they would not have sufficient funds available for a comfortable retirement.

Trust in the overall pensions industry falls as consumers get older, dropping to the lowest level for those between the ages of 50-64. This reduction in trust in the overall industry may be a symptom of a greater exposure to the pensions industry and thus a greater awareness of all the negative press coverage.

Reasons to Purchase

Access the results of Datamonitor's Global FS Consumer Insight survey, enabling you to understand drivers behind the loss of trust in your industry
Identify actionable strategies that can help encourage consumers to put aside money for a pension

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

Rebuilding Consumer Trust in Pensions

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