Rebuilding Consumer Trust in Pensions
Datamonitor, July 2009, Pages: 53
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 of this title
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.
Key reasons to purchase this title
- Access the results of The 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
Table of figures
Table of tables
Introduction: Trust in the context of Financial Services
Defining the intangible: what is trust?
Datamonitors 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 ones 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 ones 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 banks 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
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