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A Matter of Trust

A new survey sheds light on a factor that could dissuade automatically enrolled participants from staying put.

While most workers at small to mid-size businesses trust information from their banks and credit unions, those who do not may be less likely to participate in a retirement savings plan if offered one, according to a survey by The Pew Charitable Trusts.

The survey of 927 workers without access to a retirement plan on the job asked how trustworthy they find information from their “primary financial institution,” their “HR representative” or “financial institutions in general.”

Pew found an association between distrust in financial institutions and the likelihood that workers will choose to stay in a retirement savings plan if enrolled automatically, and that extends to whether they would take part in a state-sponsored individual retirement account with automatic enrollment or one sponsored by their employer.

Respondents who said they lacked confidence in the institutions were more likely to say they would “probably” or “definitely” choose not to participate in an employer-sponsored plan if automatically enrolled. In fact, about 4 in 10 of those who expressed distrust in their primary financial institution said they would opt out, with 12% saying they definitely would do so.

Among those who said they distrust information from their primary financial institution, 13% said they would opt out and another quarter (23%) were unsure, somewhat more than the 9% and 15%, respectively, of those who said they trust this institution.

Of course, that’s what people said they would do – reality, particularly aided by inertia, might be expected to be a more compelling force. And even among those who said they distrust their financial firm, more than 6 in 10 would either stay in the program at the default contribution rate or increase that rate. Meanwhile, those who expressed distrust toward their HR representative or financial institutions in general were about as likely to say they would opt out of a state-sponsored program as those who expressed trust in those institutions.

While the 2016 survey found that 9 in 10 of these workers without access to a workplace retirement plan said they find information from their primary financial institution somewhat or definitely trustworthy; just more than 7 in 10 said the same about information from financial institutions in general or their HR representative.

The survey found that white workers were somewhat less likely to distrust financial information than Hispanics or other nonwhite respondents; among white workers, only 7% said information from their primary financial institution is “somewhat” or “definitely” untrustworthy, compared with 17% of Hispanics and 19% of other respondents.

Separately, men were found to be more distrustful of financial institutions in general than women: 33% said these institutions were definitely or somewhat untrustworthy, compared with 22% of women.