Financial Services: A matter of trust

Hit by scandal after scandal, the pensions industry has an image problem. Steve Hemsley asks how the sector can convince a sceptical public to have faith.

The subject of how to support yourself financially when you retire is a serious one. Last October, the Pensions Commission reported that an extra £57bn a year needs to be spent on state and private sector pensions. It said more than 12 million workers were not saving enough and that if more was not done, pensioners would suffer an average 30 per cent decline in income by 2035.

At the same time though, consumers' trust in pensions has imploded. Equitable Life nearly collapsed (see box), while news from other providers, including Standard Life and Abbey, that final payments are being reduced has only added to the anxiety.

Faith takes a nosedive

As well as negative stories about pensions, there has been extensive media coverage of endowment mis-selling, concerns over equity release schemes for the elderly and criticism of the high APR rates charged by credit card companies. Pension-related stories are as likely to make front pages these days as to feature in personal finance supplements.

The public's mistrust of the financial services sector is perhaps greater than the industry realised or wanted to admit. And it is now proving an incredibly difficult job to win back necessary confidence.

Ross Gow, a partner at corporate and investment comms company Cubitt Consulting, has almost ten years' experience in advising pension providers. He says the trade has accepted that mistakes were made and companies are actually working hard to rebuild people's trust.

'Those under 30 are disengaged with the concept of long-term investment, although those over 30 are arguably more fiscally sophisticated,' he says.

'The media are quite rightly looking at this industry sceptically, but pensions providers do feel guilty about what has happened and are losing their aloofness and providing customers with more information on their policies and their performance.'

Wooing the disaffected

This is all very well, but simply sending out letters warning people that their investments are worth less than they might have thought will not be good enough for many.

Richard Campbell, a director at financial PR company Capital MS&L, admits it will be 'extremely difficult' to win back consumer trust.

'The industry faces tough challenges to re-establish faith in pension brands. This is such a cluttered market, there is no tangible product and consumers get a delayed reward, which makes this a low-interest sector,' he says. 'Combine the lack of interest with a lack of trust and it becomes clear that this is a severe PR headache. The industry should work together more to explain the benefits of pensions, rather than focusing so much on the complicated range of products.'

According to the Prudential Retirement Index, more than 1.6 million pensioners have had to return to work to make ends meet, while 160,000 of them are turning to gambling to try and boost their income. Four out of ten pensioners live on less than £10,000 a year, and unless the pensions industry can convince the public of the merits of long-term saving, the situation will get worse.

'We relaunched the Prudential brand three years ago after consumer confidence took a pounding,' says Prudential marketing director Roger Ramsden. 'We are not spending more on PR but are trying to use our budget more effectively.

'Our Retirement Index shows people why pensions are important, while our Plans from the Pru initiative has made products much easier to understand.'

Branding experts warn pension companies planning an aggressive PR strategy to first assess how their own brands have been affected.

'If a company has a strong reputation built up over many years, consumers will be forgiving and not hang you for one mistake,' says Michael Levy, director of branding consultancy Corporate Edge. 'Even the Equitable brand has something left in it because no one believes it deliberately set out to harm people. Every pension company needs a long-term PR strategy to build up a set of values over the next five or ten years to turn things around.'

But journalists covering the financial services sector also remain suspicious about pension providers.

'There is a massive image problem for the pensions/savings industry,' agrees The Sunday Telegraph City editor Robert Peston. 'Most companies were extremely arrogant before things went wrong and never made their management available for interview. Now the top people are more accessible.'

Sun business editor Ian King refuses to lay the blame entirely at the door of the pensions companies. He says it is up to Chancellor Gordon Brown to make long-term saving more attractive. 'The savings ratio in this country has shrunk in the past eight years and the Government must acknowledge that there is a serious problem and help the industry,' he says. 'The Sun tries its best to make pensions sound sexy because it is such an important issue.'

But Jeremy Pink, CNBC Europe vice-president and director of news and programming, says regaining the public's faith in pensions will take a long time: 'If you promise something and then deliver on that promise you will win over the consumer.

'The pensions industry has to ensure that it can deliver against what it is promising. This means providing concise and accurate information that the consumer can begin to believe in again.'

So what about the companies that have suffered more than most from the pension crisis in terms of negative publicity? Equitable has retained Tony McGarahan as its corporate affairs adviser since 2001. He has more than 20 years' experience in financial services PR and says Equitable was a one-off scandal from which the entire financial services sector is still struggling to recover.

'Equitable's PR priority since 2001 has been to build closer relationships with stakeholders, such as the various action groups, the FSA and journalists,' he says. 'Equitable is one of the most featured corporate names in the media so the game plan is to emphasise what the company is doing today and not dwell on the past.'

The inside story

McGarahan adds: 'When I first came on board I felt journalists were not fully informed about what was going on here. It also took time for Equitable to trust the media again and bring journalists "inside" so representatives could talk to them off the record about different issues.'

The recently booming property market might have persuaded many consumers disaffected with the pensions industry to consider alternatives to saving for old age. Yet as house prices stabilise and the financial services sector strives to be seen as trustworthy, there is an opportunity for pension providers to convince people to return to the more traditional long-term savings route.


Founded in 1762, Equitable Life was one of the country's most respected pension providers before it was almost brought to its knees. It had claimed to be more transparent than other life assurers, allowing its customers to accurately work out the value of their policies. However, it nearly collapsed after promising policyholders more money than it had in its coffers.

A House of Lords ruling against the society in July 2000 forced Equitable to close its doors to new business and its operating assets were sold to Halifax. Since March 2001, it has continued as an independent company with services provided under contract from Halifax and with a new board in charge.

Many other providers have slashed their bonuses and payments to with-profits policyholders in recent years, including Abbey, Clerical Medical and Standard Life.

They all blame the turmoil in investment conditions for the slump in final payments. Standard Life plans to demutualise in 2006 and, last year, it reduced is UK life assurance and pensions workforce by an estimated 18 per cent - around 1,500 staff.

The corporate pensions industry has also suffered. The newly privatised National Bus Company, for example, hit the headlines when Margaret Thatcher's government allowed its pension fund surplus to be counted as an asset of the business.


- From the late 1980s Equitable Life was telling policyholders their investments were worth more than the company had in its coffers

- By 2000, customers' policies were worth £3bn more than Equitable's assets

- Policy values were slashed by 16 per cent when the deficit reached £4.4bn in 2001.

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