Government plans to reform workplace pensions in the UK could be in for a rocky ride, industry experts are warning.
The changes, which will see employees automatically enrolled into pensions schemes, are set to begin in 2012 and will be implemented over a four-year period.
But millions of workers are likely to opt out of auto-enrolment, according to a survey carried out on behalf of the National Association of Pension Funds.
The NAPF is regarded as the leading voice in the UK pensions industry, speaking for some 1,200 pension schemes with a combined membership of around 15 million employees.
Based on survey findings, one in three workers are liable to look elsewhere for pension provision rather than stay in the scheme they'll be automatically enrolled into. That could amount to 3 million workers.
Nearly half of those who indicated they would opt out said the reason for doing so would be the cost of the contributions. Just under a third said they did not trust the government, while slightly over a quarter cited a lack of trust of the pensions industry itself.
Last month, at its annual conference, the NAPF announced it was setting up a summit of consumer groups, industry leaders, employer bodies and employee groups to look at pension fees and charges which it sees as a major obstacle to the success of auto-enrolment.
NAPF chief executive, Joanne Segars, warned people were wary of pensions and that was a big threat to auto-enrolment.
She said, “We’re alarmed that so many say they’ll reject the new deal, and the picture has got worse since the recession. Our society is sleepwalking into a crisis because it isn’t saving enough for its old age, and auto-enrolment is meant to be a big wake-up call.
“But there’s no point in bringing people into a pension if their savings are going to be eaten away by fees and charges which they can’t understand. They’ll simply walk away. The pensions industry has to be much more upfront about what it is doing. People need information about their pension in a form they understand. That means pounds and pence, not basis points and unit prices.
With auto-enrolment just around the corner, the industry needs to do more to help people engage with their pension. The summit will help forge a clear direction on transparency and communication.”
The figures form part of an annual confidence survey undertaken by the NAPF which suggests public confidence in pensions is at an all-time low.
Just under half of those surveyed said that compared to other ways of saving, they were not confident in pensions. By comparison, 42% said they were confident. This meant a pension confidence index of -6%, the first dip into negative confidence in the index’s four-year history. The index stood at +11% in 2009 and at +5% in 2010.
Ms Segars said, “Confidence in pensions has slumped at a time when it needs to be growing. It’s worrying that from next year millions of people will be auto-enrolled into a savings vehicle they have so little faith in. 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.”