Rebuilding Consumer Trust in Pensions

Published by: Datamonitor

Published: Jul. 28, 2009 - 16 Pages

Table of Contents

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

Abstract

• 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.

• 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

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