Inertia made AE a success, but now drives disengagement
The regulator’s survey asked pension savers with at least one defined contribution (DC) pension that has not been accessed how much trust they had in their pension provider.
More than one third (36%) of savers answered with a six or less on a scale of one to 10, with just 15% saying they had complete trust in their provider.
Younger pension savers are the least trusting with 43% of 25-34 year olds scoring a six or less, compared with 32% of 55-64 year-olds and 22% of 65-74 year-olds.
The FCA also calculated an ‘engagement’ score among adults with at least one DC pension into which they were making contributions. It found that more than one quarter of adults (27%) had a very low engagement with a further 24% quantified as ‘low engagement.’
Disengagement leads to worse outcomes
Younger savers were the least engaged, and as this is the cohort who will rely almost entirely on DC savings for their retirement income, they are the least likely to take action to ensure they have adequate retirement savings. Perhaps worse, they are the most likely to opt out altogether.
Damon Hopkins, head of DC workplace savings at Broadstone, said the figures were evidence of auto-enrolment’s ‘inertia issue’.
“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,” he said.
“Providers and employers must ensure they are at the top of their game”
Damon Hopkins
“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.”
