Personalised Guidance - Helping You Take Better Decisions

• Context
• The study
• Key findings
• Points to consider

Context

Personalised guidance is the provision of information and support tailored to a consumer’s behaviour, financial circumstances and/or demographic information which helps a pension provider explain the consequences of decisions that the customer must take. Under current rules, financial services providers are not able to offer tailored support. Information provided must be purely factual and generic.

People aren’t currently saving enough for their retirement, and some find it hard to make good decisions about how to manage their pension pots so the Treasury and the FCA have announced a review of these rules. The Association of British Insurers (ABI) needs rigorous evidence on the efficacy of personalised guidance to feed into this review; specifically, the ABI required specific evidence for what people do when presented with personalised guidance alongside insight into why any decisions are made when personalised guidance is presented. The goal of the research is to support ABI members as they consider how to define and develop personalised guidance and to enable the production of evidence-based suggestions for how such behaviour can best be influenced in the interests of individuals making difficult financial decisions.

The study

The study comprised an initial consultation workshop with ABI members to design the experiment, followed by qualitative interviews with 12 people aged 55- 65 who hold a direct contributions pension (DC) to help design the experiment.
This was followed by randomised controlled trial of a sample of 3,105 people aged 55-66 who hold a DC pension in the UK. The trial had four conditions which offered participants a different form of guidance in a hypothetical scenario. The participants took part in a survey and gave answers about the decisions they would make in that scenario. The four conditions were as follows:

1. Generic information
2. Personalised – with information about how much tax would be paid
3. Personalised option – as 2, with specific detail about the right decision
4. Personalised option plus choice architecture – as 3, with a button to click to aid making the right choice
   The study was conducted by research company Thinks Insight and Strategy with fieldwork partners Yonder Data Solutions and Researchbods.

Key findings

The main finding was that personalised options guidance (conditions 3 and 4) significantly helped participants. But just giving additional personalised information (without salient options) (condition 2) harmed decision making.

Other findings included the following:

• More participants indicated a willingness to pay for personalised option + choice architecture guidance compared to generic guidance.
• Preference in all cases was expressed for an upfront fee for guidance (among those willing to pay).
• Willingness to pay for professional advice on the decision did not vary significantly between types of guidance.
• Participants expect to be financially responsible for their decision - personalised guidance is unlikely to increase perceptions of provider liability.
• A majority of participants did not expect compensation from the provider for their errors.
• After a warning about the guidance, the percentage of participants who felt that a provider should be liable fell in all conditions.
• Participants who saw the generic guidance felt they would need to look for more information elsewhere

Points to consider

Methodological strengths/weaknesses: There is a separate technical document available at https://www.abi.org.uk/globalassets/files/publications/public/lts/2023/thinks-personalised-guidance-trial-protocol-dec-23.pdf. This document notes some limitations of the study including the following, and offers mitigations:

• Research based on hypothetical scenarios may not be generalisable to the real world
• Consumers may not have been able to interpret the scenarios
• It’s not possible to test long-run outcomes in this way
• Applicability: Applicable to government, regulators, policy makers, and financial service providers.
• Relevance: Highly relevant given moves by government and FCA to review the rules on guidance.
• Generalisability: The report discusses the steps taken to ensure that the findings could be generalised outside of the experimental environment.