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Trust & Confidence Index 2021: tentative positive signs from members

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Author: Trafalgar House
09 February 2021
  • Trafalgar House’s latest 2021 Index shows a small rise in member trust
  • Respondents give pensions a 2021 Trust Score of 4.63 out of 10 (4.56 in 2020)
  • A quarter (25.8%) say their lack of trust impacts their savings level (29.6% in 2020)
  • 8% feel they have less than they need in retirement (71.2% in 2020)
  • More than a third (34.1%) had not heard of any of the pension terminology put to them

Trafalgar House, the pensions administration specialist, has today announced the results of its latest Trust & Confidence Index for the pensions industry, with the headline public Trust Score for pensions rising slightly to 4.63 out of 10 for 2021 – up by 1.5%.

The Index, which takes the views of over 2,000 people, provides an annual check on the public’s trust levels in the pensions sector and the confidence they have in the industry being able to support their retirement outcomes. The 2021 Index also compares the pension sector’s performance against other financial services. The research explores key components that drive levels of trust, including how members like to be communicated with and confidence levels in their own retirement decisions. In a new area of research, the 2021 Index also examines how well people know and understand key pieces of pensions terminology.

Trust in the pensions industry

The findings of the research are once again disappointing, highlighting an overall lack of trust and confidence across several areas – although, early signs of progress are now visible in some areas. Almost a third (31.5%) of people state they have no or very little trust in the industry – slightly down from 34.5% in 2020 – while only a quarter (25.5%) say they trust pensions either a reasonable amount or a lot (down from 26.7%). Those feeling that this lack of trust in the industry has a negative effect on their savings was a concern for 25.8%, also down from 29.6% in 2020. Only one in seven people (14.9%) felt that the industry positively impacted their saving levels.

Daniel Taylor, Client Director at Trafalgar House, commented:

“Our research highlights the significant gap between the industry’s views on member engagement and the reality of what members actually experience. Although we have seen some small positive improvements in this year’s figures, the industry is still a long way from delivering on its duty to protect and support members’ long-term saving plans. To see so many people again state their lack of trust in the industry and that this is negatively affecting their savings and decisions shows that much more needs to be done to build relationships with members.

“A small degree of comfort can be taken from the needle moving slightly more favourably during what has been a tremendously difficult period for savers. The versatility and flexibility shown by much of the industry seems to have been noted – a surprising move when we could have expected the scores to head in the opposite direction given the pressures caused by the pandemic. Winning this small battle is, however, overshadowed by the industry’s overall losses in the war to win member trust and confidence. We must now hope that further efforts this year will continue the trend towards more positive scores in our next Index.”

Members’ own decisions

Once again members displayed more faith in their own decision making, with results for being fairly or very confident in their choices of pension provider (58.6%), investments (57.8%) and level of charges (47.2%) all higher than last year’s Index by around 2.5%. Confidence in their own role in the amount they have saved fell from 49.5% to 46.6% this year, but remains substantially higher than their confidence in their overall retirement picture.

This is evidenced by nearly seven in 10 (69.8%) people believing they will have slightly or much less than they need to retire comfortably. Just 9.3% felt they would have more than they needed, although this was higher than the 8.2% reported in 2020.

Member understanding

In new research for 2021, people were also asked whether they had heard of, and were confident they could explain, key pieces of pensions terminology. Continuing the disappointing results, no term had been heard previously by more than half of the respondents. Annuity scored highest, with 46.5% having heard the term, while surprisingly only 31% said they had heard of auto-enrolment. Most worrying of all is that 34.1% said that they had not heard of any of the seven most common and fundamental retirement terms.

On a positive note, four out of five people (79.1%) who had heard of auto-enrolment felt they were confident they could explain its meaning to friends or family, while 76.2% felt they could explain Normal Retirement Date. For the five remaining terms – annuity, lifetime allowance, annual allowance, income drawdown and GMP – only around half of those who had heard of each term felt they could also explain its meaning to others.

Taylor added:

“The picture from members remains similar to last year – that most feel they are doing what they can to support their own retirement plans, but believe they will fall short of what’s needed. It is our role to empower members to make the best decisions for themselves and to have confidence in the choices they are making, because we’ve helped them understand why those choices are the right ones. But, judging by the lack of member knowledge for the most basic and most commonly used terms, the industry needs to go the extra mile to communicate and engage at a fundamental level so members can walk before they are asked to run.”

Download a full copy of the latest Trust & Confidence Index here.

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