Over half (54 per cent) of Brits see the government’s pot for life proposals as a positive change to the UK pension system, although a “crisis of confidence” could be brewing, with 49 per cent nervous about making bad decisions, research from Barnett Waddingham has found.

The survey, which included views from more than 2,000 UK pension holders, found that just 15 per cent believe this would be a negative change, while more than half (54 per cent) think a pot for life would make them more engaged with their pension, and over a third (38 per cent) think it would make them more confident about retirement.

However, Barnett Waddingham warned that while Brits are "overwhelmingly positive" about a pot for life model, a "clear crisis of confidence is brewing" when thinking about the financial decision making required to choose a pot.

Indeed, the survey found that nearly half (49 per cent) of pension savers are nervous that they would make bad decisions about which pot to choose, rising to 53 per cent of women and 58 per cent of people aged 51-55.

This reticence in older savers was seen in terms of pot for life positivity too, as Barnett Waddingham found that younger savers are more likely to think it would make them more engaged, with those aged 31-35 topping the list at 60 per cent, marking a "stark contrast" on the 44 per cent of those closer to retirement (aged 61-65).

Further saver uncertainty could be seen when looking at the most influential factors when choosing a pot for life, as almost half (45 per cent) of respondents said they would trust the recommendation of consumer savings champion, Martin Lewis, over the financial performance of a fund (41 per cent).

In addition to this, 39 per cent said they would select a pot based on a trusted brand, or if their financial adviser were to recommend a scheme (30 per cent), while a quarter (25 per cent) would turn to the recommendation of friends and family and 24 per cent would turn to their employer.

Given these findings, and recent data from the Financial Conduct Authority showing that just 8 per cent of UK consumers received full financial advice in 2022, Barnett Waddingham warned that a pot for life model could create a "rift" in the pensions market if not rolled out carefully; seeing the wealthy and confident benefitting over those with lower levels of financial means, literacy, and engagement.

Barnett Waddingham partner and head of DC pensions, Mark Futcher, said: “British savers have clearly been wooed by a sexy-sounding new pensions policy that has built up their hopes for a better future for retirement.

"But issues of apathy, low financial literacy, and chronically low pension saving won’t be fixed by a pot for life.

“What’s worse, we know that Australian Superfunds on the other side of the world tend to splash the cash on sponsorships of sports teams, and advertising campaigns which would clearly win over savers looking for experts and brand trust.

"Yet, this spend comes at an opportunity cost of investing in member outcomes, and we risk a pensions system that is fighting for commercials, not consumers."

Futcher also argued that a "fresh coat of paint won’t hide the mould for long", arguing that there are some very big pension problems the government must fix before a pot for life will work.

"Increasing auto-enrolment levels, auto-escalating contributions at the point of pay rise, and lowering the contribution age threshold are just a few hopeful breadcrumbs," he continued.

“The government must work with the industry, not against it, to create the best outcomes for pension savers. This means enacting reform to ensure the country has a financially engaged, and confident population that clearly understands their path to retirement - whatever that model may look like in ten years’ time.”

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