Just 29 per cent of people are confident that contributing to pension plans is the best way to save for their retirement. According to the YouGov poll, over two thirds of the population appear to have completely disengaged with pensions.
People are clearly very nervous about committing to long-term savings with no access to any of the capital that is being built up. But government's constant tinkering with pension legislation - particularly evident this year (read more here) - and the perceived complexity of the pension rules has undoubtedly contributed to this distrust (read Why pensions are a bad deal). Meanwhile, new research exposes how the pensions industry milks customers via hidden charges.
Mark Hyde Harrison, the new chairman of the National Association of Pension funds, has asserted that the pension system in the UK's private sector is 'significantly flawed' and will leave too many savers with measly retirement pots.
"Information about costs and charges is far too opaque. If the pensions industry was more upfront about them than charges could be driven down," he said. "This can leave unwatched pensions languishing in low-performing funds, or being eroded by high charges."
An estimated £3bn a year of charges being incurred are not disclosed to investors, according to research from wealth management company SCM Private.
The effect of this over 20 years would be equivalent to an evaporation of 15 per cent of an individual's pension fund.
The wealth manager analysed over 1,000 UK individual UK pension funds and found that there was an average portfolio turnover of 128 per cent per year, meaning that a typical holding is kept for just nine months before being sold.
SCM Private estimates that this adds 0.7 per cent in costs per year to an average UK pension fund that is not disclosed to investors. The effect of this over 20 years would be equivalent to 15 per cent of someone's pension fund evaporating.
SCM research reveals that the average 15-year return of the unit trusts held in the individual pension funds was just 4.2 per cent per year, so saving much of the needless dealing costs can increase returns substantially.
The solution, says SCM, is investing via index funds to remove the hidden fund dealing costs.
