Smarter Signposting to Pensions Guidance

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

Context

Due to their complexity, pensions are difficult for individuals to understand, resulting in the need for pensions guidance. The Pensions Freedom reforms in 2015 created an environment where the need for guidance became more important than before. The policy gave people significantly more freedom and flexibility over their pensions and enabled consumers to make choices that suit their specific needs. At the same time, it has also exacerbated their complexity, further increasing the risk of poor decision-making from pension holders.

To support pension savers, the government created a ‘guidance guarantee’. However, despite the benefits of seeking guidance, in 2018/19, nearly half of people who accessed their pension pots did so without getting regulated advice or guidance. The idea of Smarter Signposting was originally conceived in the first phase of the Financial Capability Lab and referred to as Guidance that is Right on Time. The first part of the project involved using customer data to identify which customers would benefit particularly from guidance, and at what point in time they would likely be most receptive. It then developed behaviourally informed communications to encourage these customers at that particular point in time to access the pensions guidance that is appropriate for them. The project was conducted collaboratively with implementation partner Royal London, the UK’s largest mutual life insurance and pensions provider. Royal London has funds under management of £153 billion and 8.8 million policies in force.

The study

The Smarter Signposting trial was a collaboration between Royal London and the Financial Capability Lab, a programme funded and overseen by The Money and Pensions Service (MaPS) and implemented in partnership with the Behavioural Insights Team.

Smarter Signposting had a large sample size (87,000), targeted customers based on income and pension contributions, and had three treatment arms. The three treatment arms correspond to a different message contained within a letter or email, which was informed by behavioural science and were designed to induce participants to take up Pension Wise guidance, for example the three varieties of messaging:

1. “We are looking out for you” – this version highlighted Royal London’s duty of care to customers.
2. “This is meant for you” – this version emphasised the targeted and personalised nature of the message.
3. “Act now, not later” – this version aimed to foster a rapid response.
4. For the purposes of the project, three different phone numbers were set up to correspond to the three different messages sent.
5. Qualitative follow-up research was also conducted.

Key findings

Evaluation of the intervention:

The impact of the emails and letters on engagement with money and pensions was evaluated using a randomised controlled trial.
BIT also conducted qualitative research consisting of interviews with Royal London customers and focus groups from MaPS and Royal London.

Impact evaluation methodology and findings:

The first part of the evaluation measured the impact of the three communications on the uptake of guidance. The primary outcome used to measure the impact of communication was whether they called TPAS or MAS to receive guidance, but several other secondary outcomes were measured such as visiting a TPAS or MAS website, and alterations to pension contributions among others.

Findings:

• 0.2% of the sample (240 customers) took up guidance over the telephone and 12 customers accessed guidance online; a lower response than expected.
• Follow-up qualitative research suggested three factors impacted on take-up rates: no need for guidance, communication format and communication timing.
• There were no significant differences between responses to the three different communication messages.

Of the 12 customers interviewed, 8 had taken up the offer of guidance and fell into two distinct categories:

1. Reassurance Seekers: those in a comfortable financial position – their motivation for guidance is to ensure their current plan is viable and favourable.
2. Information Seekers: those in a less stable financial position – their motivation is to obtain tailored advice in order to develop a retirement plan

For the four customers interviewed who did not take up guidance, three key reasons were identified:

1. No perceived need for guidance
2. Communication format
3. Communication timing

Recommendations:

• Behavioural approaches can induce pension holders to take up pension guidance, although the exact magnitude of the effect is unknown.
• Future approaches may consider identifying the right groups of customers who would benefit most; and using high-frequency data from multiple sources (e.g. bank transactions) to target customers at the right time.

Points to consider

• Methodological strengths/weaknesses: Contextual factors around resistance and apathy towards pension guidance may have played a role in the very low response rates that limit the application of findings.
• Generalisability/ transferability: The trial did not feature a control group of customers who received a ‘business as usual’ communication therefore it is difficult to compare the trial across the general population.
• Relevance: This report is applicable to anyone with an interest in understanding how to engage working age and retired people with financial advice.
  • The insight generated may be useful for policymakers or financial institutions who are also exploring how to engage greater numbers of people with financial guidance.