Small Steps to a Better Future

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

Context

This report is the second in a series looking at how language and framing can support engagement in retirement saving for UK pension savers.

The first report, “Beyond the defaults”, highlights the significant importance of helping members make a clear connection between the pension saving they do today, and the income they will get when they retire. It provided a reminder that auto-enrolment in and of itself was only one part of the retirement equation and contributing further would enhance savers’ outcomes.

In this new research, the focus is on people in their mid-working life. The researchers ask whether better communication around planning for retirement income could help overcome some of the barriers that people face in engaging with their pension saving, and understanding what it could mean for them in future. The aim throughout was to identify practical approaches that could boost the effectiveness of tools and interventions targeting people in their late 30s, 40s and early 50s – specifically those designed to build engagement with retirement income and to help people take action.

The study

The research questions were:

1. How do people currently understand and talk about planning for their retirement income? What barriers of comprehension and awareness stand in the way of engagement, action and confidence?
2. How can language and message-framing help people to understand what their pension saving means for their income in retirement, and to know what actions they can take in mid-working life that can make a positive difference to their retirement outcomes?

The research is a collaboration between Invesco, Invesco Consulting, maslansky + partners and Nest Insight. A multi-method research approach was conducted, including:

1. Expert interviews: nine industry experts were interviewed to identify perceived barriers to engagement, best practices and desirable outcomes.
2. Qualitative research: 28 UK pension savers participated in four focus groups to understand experiences and context in depth and to test and evolve language to engage people with planning for retirement income.
3. Nest member panel: 65 Nest members took part in an online panel, completing creative tasks and responding to retirement income planning tools.
4. Quantitative research: following the qualitative and Nest member panel research, the learnings were validated and quantified via a 15-minute online survey conducted with 1,800 pension savers (the participants were all: living and working in the UK; covered by auto enrolment; working for an employer offering a defined contribution pension scheme; and, with an individual income between £10,000 and £59,999 per year).

Key findings

The study began by looking at people’s retirement-planning starting points. In this mid-life stage, many people start to feel a combination of hope and fear about their later lives. Many feel unprepared to think about whether they’re on track for an adequate retirement income. Significant barriers were then looked at that may prevent the cohort engaging with planning for their retirement income. Three common barriers were identified:

• Affordability: 5 in 10 say they can’t afford to contribute more to their pension right now.
• A sense of being overwhelmed: 4 in 10 say it’s overwhelming – there’s too much to think about.
• Low confidence: only 2 in 10 say they feel on track when it comes to planning for retirement.

To address and overcome these barriers some foundational messages were identified to help people overcome these barriers and take their first steps towards taking action:

1. ‘You’re already on your way to having a retirement income’
2. ‘Start from today and plan forwards’
3. ‘There are steps you can take’

Significant increases were seen in the proportion of people who said they were likely or very likely to take action, when asked before and after reading the messages developed in this research.

The researchers explored a range of different versions of key messages encouraging people to engage with retirement income planning. Different words, phrases and communication approaches were tested to identify what language and framing was most engaging and most persuasive. By making granular comparisons between different words and sentences, the researchers found big differences in people’s emotional and rational responses (adopting the framework developed by Invesco Global Consulting – ensuring communications are Positive, Plausible, Plainspoken and Personal).

The researchers were also able to optimise the messages for this target audience and, as a result, see a meaningful lift in how likely people were to say that they’d take a range of actions towards improving their retirement incomes. This included checking their pension balance(s), using retirement planning tools, and setting their own retirement income goals.

Points to consider

• Methodological strengths/weaknesses: The methodology is comprehensive and thorough, consulting with experts and pension holders to understand the issues in detail before quantifying the learnings.
  • A sample size of 1,800 research participants, broadly representative of the target group (with the use of screening), was achieved for the quantitative arm of the research.
• Generalisability/ transferability: This is specific to the UK auto-enrolment pensions market. Whilst the research focuses on the ‘mid-life’ population, the outcomes of the research are potentially transferable to all pension scheme members.
• Relevance: This research is relevant for pension providers, government, policy makers and support agencies with an interest in how language and framing can improve financial communications and enhance engagement in financial products.