Automatic enrollment and state-based retirement accounts may be for naught if the retirement industry doesn’t appear trustworthy to working Americans, a new survey says.
Workers who distrust financial institutions are less likely to stay in a workplace plan if enrolled automatically, according to a Pew Charitable Trusts survey of 927 workers without access to a workplace retirement plan.
A report from John Scott, director of the Pew Charitable Trusts’ retirement savings project, and Henry Watson, a Pew researcher, suggests that workers from certain groups less trusting of traditional financial institutions – particularly Hispanics – may not benefit equally from the implementation of auto-enrollment and state-run retirement plans.
In general, workers find information from their financial institutions trustworthy: 90 percent of the survey’s respondents believed that messages from their primary financial institution were trustworthy, and 72 percent felt that financial institutions in general were trustworthy. Nearly three-quarters of the respondents, 73 percent, felt like information received from their workplace’s human resources representative would be trustworthy.
Those who did distrust financial institutions were less likely to participate in 401(k) plans: 40 percent respondents who said that they lacked confidence in their primary financial institution said that they would probably or definitely opt out of a retirement plan with automatic enrollment versus just 15 percent of those who found financial institutions trustworthy.
Respondents lacking confidence in their primary financial institution were also significantly more likely to choose to opt out of recently proposed state-run retirement plans, according to the survey.
Distrust in financial institutions is more common among Hispanics and other non-white respondents than among white Americans, according to the survey, while men are more likely to be distrustful of institutions than women.
Pew notes that fewer than half of all private sector workers currently participate in a workplace retirement plan. Attempts to increase participation via auto-enrollment or state-run retirement accounts may not be as successful in reaching groups harboring higher levels of distrust for financial institutions.