Trust in banks dives as savers seek new homes for cash

Consumer trust in banks has eroded dramatically in the past year as the spate of financial crises and the continued economic downturn take their toll on customer confidence, according to retirement income specialists, MGM Advantage.

The MGM Advantage research, conducted as part of its second annual Retirement Nation Survey, tests consumer confidence in a range of financial institutions alongside how ready people are for their approaching retirement. The findings reveal that the number of UK adults who would rather trust putting their cash under the mattress than in a bank or building society has almost tripled from five per cent last year to 13 per cent now.

And overall trust in banks and building societies has fallen, too. Last year 45 per cent of people said they most trusted building societies with their money, but that has fallen to 37 per cent – though building societies remain the most trusted place for people’s money.

Banks have taken more flack – twelve months ago 39 per cent of people named a high street bank as their ideal place to stash their cash, but now just 31 per cent still feel banks are the safest place for their money.

Conversely, trust in mutuals – organisations owned by its customers and run for their benefit with no external shareholders – has increased in the same period from 10 per cent last year to 15 per cent now, according to MGM Advantage. The firm, itself a mutual, suggests consumers are increasingly looking for organisations who put customers first over paying dividends to shareholders.

Chris Evans, Chief Executive of MGM Advantage, said: “Whatever the root causes of the credit crunch and the consequent recession, it is banks that have suffered the most damage, both to their bottom line and to their reputation.

“With the Government shoring up the coffers of many high street institutions, it’s understandable that consumers are looking for other alternatives.

“Building societies have always enjoyed a strong reputation as customer-friendly organisations that have avoided external pressures from shareholders. Mutuals are in a similar boat and consumers are beginning to appreciate the mutual way of doing business.”

Meanwhile, with trust in finance firms diminishing, people are also demonstrating ambivalence towards financial planning. According to MGM Advantage, over half the nation is not prepared at all for their retirement, with around 54 per cent of people polled admitting they haven’t even thought about planning for life after work.

Women are less likely to plan ahead than men, with 59 per cent of women compared to just 43 per cent of men saying they are totally unprepared for retirement. Critically, a massive 32 per cent of over 55s feel not prepared at all for retirement despite approaching State retirement age.

Chris Evans added: “It is staggering to think that one in three people on the cusp of retirement feel so utterly unprepared. When you stop working your life changes completely and there are some massive financial decisions to be made that will affect your life forever. Anyone unsure about their future in retirement should speak to an independent financial adviser as soon as possible.”