Ok, so It’s probably not going to be up there with the original disco classic, but it does sum up how many people feel when it comes to pension savings – and not a glitter ball in sight!

Generally, unless you work in the pensions industry or you’re coming up to retirement, we tend to avoid the topic of pensions in general conversation – ultimately, it’s boring and as an opening line at a dinner party, it could be an instant conversation killer. This may be partly because it feeds into a natural ‘head in the sand’ mentality. Pensions remind us of getting older and the future, which is too far ahead to think about and therefore equally baffling. 

On top of this, in terms of our finances, there’s already a lot to contend with in the present – our daily expenses – food, mortgage or rent, not to mention the rise in cost of power? All of this makes it even more challenging to not just focus on the here and now. 

Rock the boat

Let’s face it, your general finances or tax situation are no more exciting than pensions, they’re just more imminent. The impact of any changes to your current finances can be seen instantly. If you don’t have enough money to pay your rent the implication is very clear and immediate. Equally, if for example you went shopping and bought yourself a new outfit, you’d have the instant gratification of enjoying wearing it straight away, or at least in the near future. At 40 you’re not going to buy a new pair of trousers to wear when your 65 – there’s too many unknowns, size, colour – will flares have made a come back? 

It’s these unknowns that add to a general sense of being overwhelmed and therefore not engaging. Research by social psychologists at UCLA has shown that we find it difficult to relate to our future selves who feel “like a stranger on the street.” There is an emotional disconnect – by saving for a pension we feel that we’re effectively giving money to someone we don’t know.

Evidence also shows that as human beings we’re generally not able to cope with too much choice. When faced with too many options we’re likely to make none at all. A good example of this is the “jam experiment” from a paper by Sheena Iyengar and Mark Lepper. On two consecutive days they set up a tasting booth at a grocery shop in California, one with 24 flavours of jam the other with six. The results showed that more people went on to buy a jar of jam when presented with only the six choices. In the pensions world we can see this effect in action but one step further with members actively not making a choice. 

In the UK the highest percentage of members in DC pension arrangements are invested in a default option, rather than self-selecting from a range of investments. The report, ‘Automatic Enrolment: What Will The Next Decade Bring?’ highlighted that automatic enrolment achieved its target of increasing the number of members in workplace pension schemes by over 10 million. Ultimately, it’s in our nature to take the option that involves the least amount of effort.

Knock on wood

So, how do we change behaviours to enable people to connect with the ‘future me’ and bypass the many barriers that distract us along the way? Certainly, the way we communicate about pensions is critical. This doesn’t necessarily mean trying to make pensions more exciting (creating a theme tune or providing fireworks when you reach your savings goal perhaps). It’s about making the savings and investment process as simple and easy to understand as possible and relevant to the individual. The pensions industry has a responsibility to make sure people are receiving the right support and guidance – providing a text-heavy document once a year and wishing them good luck is not an option if we want to ensure people will have enough money to live on when they retire.

Sound the alarm

Regular prompts from pension plans can help to remind members to look at their benefits and take the appropriate actions at the right time throughout their working lives. This needs to be done on a regular basis, a one-off prompt every six months will not help members to get where they need to be at retirement. Most of us are now banking online or using an app, we can check our savings instantly and it will send us notifications when payments have been made or when our credit card payment is due. Similar texts or emailed prompts to scheme members can help focus the mind and ensure that action is taken at the right time. 

Pension schemes have access to a large amount of information about their members, so there should be no need for generic content. If we receive something that is not relevant to us or that doesn’t relate to our particular circumstances we’re more likely to ignore it. 

Communications should be tailored to the individual as much as possible – members should feel that you’re talking directly to them and not just a number. Digital allows us many more options and engaging ways to connect, from apps or portals to video and these tie in with the way we are taking in information in our day-to-day lives. A report by Ofcom has shown that 96% of people have watched explainer videos to understand a product or service. When trying to solve a problem or understand how something works we’re no longer reaching for a manual, but heading onto Youtube.

Outro

Ultimately, members need to feel supported and know who and where to go to get the information they need. If the information or support is not there or difficult to access they are more likely to disconnect.

Pensions don’t need to be exciting, in fact they should be thought of in the same way as the rest of our overall finances – a necessity, to allow us to continue to do the things we want, now and in the future.  

Get in touch today to see how we can help you transform your pension communications.