Distrust hinders saving ahead of auto-enrolment

Distrust and apathy will continue to act as a barrier against retirement savings ahead of auto-enrolment, according to research by Buck Consultants.

The consultant found, following a series of focus groups, the perceived economic instability of recent years and a strong current of distrust of banks and financial companies have made people nervous of change and wary of tying up their resources for long periods.

Buck's Financial Frontiers report found people preferred a "live for today" philosophy as the foundation of employee apathy towards retirement savings and identified five reasons why.

These were: a belief in the possibility of dying tomorrow; an assumption that you can work until you die; a paternalistic faith that someone will look after you; an unwillingness to delay gratification; and an inability to understand the maths.

In addition, an increasingly flexible working culture with no fixed lifestyle plan, opportunities to have a varied career trajectory and a perception that they can work past retirement age, means that people want to have control of their money now.

Buck Consultants principal in the global benefits administration practice Girish Menezes said: "One of the major barriers to pensions is the complexity of the products. Confusing literature and jargon floods the market, and this creates a ‘smoke and mirrors' perception that makes it difficult for employees to understand how they can secure good returns on their pension or even if a pension is a reliable route towards post-retirement income."

The consultant is urging employers to adopt a new approach to engaging with employees, including delivering message like a journalist, not an administrator; take relevant advantage of social media; and move towards integrated employee reward.

It said in addition the Department for Work and Pensions' "jargon" buster guide announced last week , as well as its £10m advertising budget in the run up to auto-enrolment were a step in the right direction.