The National Association of Pension Funds (NAPF), which represents almost 1,200 pension schemes with combined assets of nearly £800 billion, called on the Coalition Government to urgently boost confidence in the pension system or risk seeing millions of Britons slide into poverty in retirement.
In an annual survey, the NAPF found that the number of people who do not have confidence in the pension system outweigh the number of people who do. It is the first time in the survey’s four-year history that the balance has been in negative territory.
Of some 900 working adults surveyed, almost half said that they are not confident in pensions as a means of saving money. This compares to just four in ten who said that they are confident.
Last year the number of people who were confident outweighed those who were not by 5 per cent.
The NAPF also found that only 35 per cent of people think that a pension is the best way to save for retirement. This has fallen from 45 per cent one year ago.
Conversely, investing in property and ISAs has grown in popularity as a means of saving for retirement.
Joanne Segars, chief executive of the NAPF, said that faith in pensions has slumped at a time when it should be growing. She said that the decline is particularly worrying because from next year millions of people will be auto-enrolled into workplace pensions which they clearly have “so little faith in”.
According to the NAPF’s Pensions Confidence Index, three in ten Britons rate a pension as the most important benefit associated with their job, down from four in ten last year.
Ms Segars said: “Politicians have to boost confidence in pensions, or people will simply opt out. We need a pension framework that the public can believe in and rely on.
“We urge the Government to do more to fulfil its own pledge to reinvigorate pensions. It must get on with reforming the state pension by setting a simpler, single tier system. This would set a clear foundation for retirement on which people can build their workplace pension and savings.”
The NAPF said that the economic downturn has eroded faith in pensions, and the recent sharp stockmarket falls have also put many people off.
Hidden costs and the increased retirement ago are also behind the lack of faith. On top of this, squeezed household incomes and rising inflation mean that to too many Britons pension outlays can “seem like the weakest link” and are therefore cut.
“The Government must stress the importance of saving,” said Ms Segars.
Ros Altmann, director-general of Saga, the over-50s group, said a growing number of people had turned their backs on pensions after a series of scandals and amid increasing uncertainty over their jobs.
“People don’t have confidence in pensions,” she said. “We need to wake up to what is happening to savings. We have moved away from a culture of saving towards a culture of debt.
“If an advisor is advising you to put money into a pension it requires reams of paperwork but, until the credit crisis, it was very easy to borrow hundreds of thousands of pounds you could never pay back.”
In the summer an independent report into the state of pensions in the UK found that almost three quarters of private sector workers will be unable to “adequately exist” when they retire due to a low level of savings and the complex, costly and inefficient pensions system.
The report by the Workplace Retirement Income Commission said that millions of workers who retire after 2020 should expect a “bleak old age”.
Steve Webb, Pensions Minister, said last night: "We entirely agree that more needs to be done to boost confidence in pensions. We’re working on plans to simplify the state pension – providing a firm foundation on which to save ahead of the introduction of automatic enrolment."
By James Hall and Tim Ross, Consumer Affairs Editor The Telegraph.
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