Friday HighlightOct 29 2021

The language of pensions

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The language of pensions
Pexels/Suzy Hazelwood

Language is key to improving pensions engagement, according to a DC pension research project Small steps to a better future by Invesco, Invesco Consulting, Nest Insight and communications specialists maslansky + partners.

Drawing on input from nine industry experts, 1,828 pension savers and 65 Nest members, the research highlighted common barriers to pension engagement for people in their 30s, 40s and early 50s.     

Affordability was the main obstacle; half of those surveyed said they were unable to contribute more to their pension at the moment. Also, more than a third (35 per cent) pointed out that they had more pressing financial priorities than their pensions.

Adviser Carl Lamb of Smith & Pinching comments: “People are squeezed by the cost of living going up. For some, the choice is stark − food on the table or pension savings.”

But it is not just about money, says Fiona Tait, technical director at Intelligent Pensions: “Issues such as affordability are certainly real, but they are also sometimes ‘legitimate’ excuses to avoid taking action.”

Covid-19 is also a factor: a third of respondents reported feeling less confident about planning for the future, due to the pandemic. Nearly half (40 per cent) said they felt overwhelmed by the subject of pensions. Only a fifth (20 per cent) said they were on track with their retirement goals.  

Lack of knowledge was identified as an issue too. Nearly half (46 per cent) of those surveyed said they do not know how much income their pension will provide on retirement.

Slightly more than a third (38 per cent) were aware of online retirement planning tools, and a tiny percentage (5 per cent) had contacted a free government pensions advice service or a financial adviser. 

But people are not happy about this state of affairs. The research reflected on a “sense of defeatism” referred to by more than a third (35 per cent).

Regret was noted too, particularly among the 45-55 age group: “Lots of people are apathetic about pensions till they get to a certain age and then realise that the clock is ticking,” says Lamb. 

Overcoming the obstacles  

The study tested various words, phrases and communications approaches to identify which were most engaging and persuasive.  

It found that three key messages had an impact, including “You’re already on your way to having a retirement income”; “Start from today and plan forwards”; and “There are steps you can take”.

When people were asked before and after reading the messages developed in the research, there was a jump in the proportion of people who said they were likely or very likely to take action in the next six months. 

For instance, the proportion of people who were likely or very likely to increase pension contributions went up to 39 per cent from 16 per cent, and in the case of setting a retirement income or pensions-savings goal it rose to 40 per cent from 23 per cent.

Jo Phillips, director of research and innovation at Nest Insight, said: “These results give us reason to believe that these messages can help drive positive change in the number of mid-working-life savers planning and preparing for retirement.”

However, Henry Tapper, executive chair at AgeWage, says there is further room for improvement with pensions communications: “We need to be more honest with customers and tell them what is going on with their pensions − good or bad. 

“Communications need to be factual and relevant. People will prioritise retirement savings where they feel they are experienced enough to take decisions, and that means giving them relevant personal information.”

And just improving communications is not enough, says Tait: “Changing the language will only do so much − what we need is a simpler taxation regime for pensions and easier access for people who want to check their pension. 

“The pensions dashboard should provide the access needed and make pensions more user-friendly for the majority of people who are not pensions experts.

“It is taking a long time to deliver, which is unsurprising given the many sources of data required. However, it has the potential to be the ‘go to’ place for all pension planning.”  

Flexibility around access to information is also key for pension savers, says Tapper: “I hope that we see more updates delivered digitally to people’s chosen devices and in a way that suits the saver.

"I support the use of dashboards for finding, displaying and comparing pension pots and for giving people the chance to take decisions based not just on their pots but on their pensions. Dashboards, like provider websites, should be available 24/7.”  

Tapper says he is unsurprised about the small number of people seeking pensions advice from financial advisers: “Like mortgage brokers, financial advisers are wanted occasionally and for transactional purposes.

"Most advisers prefer an ongoing relationship with their clients, which most people do not want and cannot afford.”

It is also due to lack of knowledge, says Tait: “Many people are unaware of the value that a financial adviser can deliver to them."  

And if they do not already know an adviser or know of one, this can be a drawback too. “The adage that ‘people buy people’ is very relevant when it comes to financial advice,” she adds.

Tait says: “The profession is itself to blame for much of this, as there have been well-publicised failures from time to time and we don’t seem to have found a common voice to promote the positive side of what we do.

"The fact is that most people trust their own adviser, but they don’t trust the profession as a whole.”