Testing retirement communications

• Description of the programme
• The study
• Key findings
• Points to consider

Description of the programme

Pensions savings and the choices people make regarding those savings can have a hugely important role in determining quality of life during retirement. In the past, people have benefited from employers providing for their retirement through defined benefit (DB) pension schemes. However, defined contribution (DC) pension schemes are now increasingly the norm. During the 2016/17 financial year, £609 billion in assets were held in DC pension schemes, while it is estimated that by 2030 this will have risen to £1.7 trillion. Unlike state pensions and DB schemes, DC schemes allow individuals to make their own choices on how to access their pensions and provide an income in retirement. In 2015, pensions were reformed to give consumers much more choice in how and when they accessed their pensions. At the same time, Pension Wise was also set up, to provide free pensions advice to those approaching retirement.

The Financial Conduct Authority (FCA) mandates that firms must provide information to individuals about their pension and how they can use it, often in the form of ‘wake up packs’ (WUPs). This information is usually provided about six months before an individual’s default retirement date.

This 2018 evaluation from the FCA, collaborating with two UK financial institutions, tests whether variations to the WUPs would have any impact on:

• Consumers awareness and use of Pension Wise;
• Their engagement with their pension provider;
• Whether they switched provider to access their pension savings.

The study

Surveys and administrative data were combined to examine the extent to which small changes could affect both the stated and revealed behaviour of individuals regarding their pensions.

There were two randomised control trials (RCTs):

Trial One – changes were made to the WUP designed to attract attention and encourage engagement with Pension Wise among a sample of 3,000 DC pension holders. A control group received the normal WUP. There were two interventions:

1. A signpost to Pension Wise on the front page of the WUP.
2. A one page insert in the WUP including information about Pension Wise.

Trial Two – this concerned follow-up reminders sent after the WUP, among a sample of 4,000 DC pension holders. A control group only received the WUP, while three treatment groups received an additional one page letter sent a month after the WUP. The treatments comprised:

1. Standard information in the letter about Pension Wise including a simple signpost to the website.
2. The standard information plus a prompt to record the details of an appointment.
3. An appointment prompt, making it clear there was an available appointment for the individual.

Key findings

• Trial One showed no significant effects for the treatments on most of the outcomes of interest. This included whether individuals have used Pension Wise, whether they have contacted their provider, or whether they have moved any money to a new pension provider.
• However there was an effect (a 7% increase) for the signposting treatment, when individuals were prompted to remember whether they had used Pension Wise after having Pension Wise explained to them.
• In Trial Two, highlighting the availability of appointments has a positive and statistically significant effect on people calling Pension Wise, increasing the likelihood of this occurring by 4% compared to just using the simple reminder.
• For the other treatments in Trial Two, there were no further significant impacts across a range of outcomes.
• The reminders did increase engagement with the pension provider in the four weeks directly after the intervention. However, over the entire trial period this effect disappeared, suggesting the reminders facilitated activity that would have happened anyway.
• The authors state that their paper supports other work showing that disclosure tends to have a relatively small impact – if any at all – on consumer switching behaviour.
• However, they do highlight a 2017 report from the Behavioural Insights Team that shows that in a retirement choices context, reducing the volume of disclosure can help customers pay attention and seek further guidance, which can ultimately lead to improved outcomes.

Points to consider

• Methodological strengths/weaknesses: Findings are tested for statistical significance, adding more robustness to the analysis.
• Control groups are used, allowing findings from the intervention group to be compared with groups not receiving the same intervention for benchmarking purposes.
• Generalisability/ transferability: The evaluation is of significant interest to those looking to commission or authorise interventions designed to increase engagement with individuals’ pensions, including switching to a different provider.
• Relevance: The findings are based on pension holders from two UK financial institutions and should not necessarily be seen as representative of the entire market.