Schemes should better communicate to members by tapping into their emotions and developing a coherent strategy, and using specific techniques. Kim Kaveh reports from PP's DC Conference.
Five years of automatic-enrolment (AE) has successfully brought eight million into workplace pensions, with that number expected to reach as many as 17 million by 2031.
There is an obvious need for schemes to communicate pensions with its members more effectively, to help them reach good retirement outcomes.
Speaking at PP's annual Defined Contribution (DC) Conference on September 5, a panel of leading communication and behavioural psychology experts, spoke about why schemes need to re-examine their engagement strategies.
A panel of communication and behavioural psychology experts spoke about how schemes should go about to develop effective communications strategies, and how behavioural psychology can play an important role.
The People's Trust founder and Moneybox App non-executive director Daniel Godfrey said the objectives of a communication strategy would help workers make better decisions.
Godfrey, who was previously chief executive of the Investment Association, said: "We must communicate to different people in different ways through stories and pictures, in order to address members' emotional needs in a way they can get comfortable with."
In addition, it is important to look at where the gaps in communications are before taking action.
Ferrier Pearce communications strategic partner Lesley Alexander, who has held senior pensions positions, and was previously chief executive officer of the HSBC Bank Pension Trust (UK), said: "We're talking about workplace pensions and employees who are looking for help and assistance in the workplace, so providers and administrators must be able to deliver everything required."
"For bigger and trust-based schemes, we might want to go that little bit further and articulate principles around communications and set objectives, and then revisit them on a regular basis."
Schemes must also ensure they are 100% committed to providing a good communication strategy.
Alexander said: "Schemes are going to have to look at data closely and identify key messages, spend money creatively and use lots of different media to get the messages across."
Further recommendations include gamification, a method welcomed as a way of engaging members with pensions and improving communication, by point scoring, competing with others and making rules of play.
Arguably, it is a way to make pensions ‘timely,' in order to meet the needs of the tech-savvy generation of the workforce.
Godfrey argues: "Gamifying and attractive ‘what if' visuals are particularly effective, and you can let people compete with each other, which works well especially with people working in groups, so they can, for example compete by seeing who has more money in their ISAs that week."
Role of emotions
Emotions also play an important part when it comes to savings behaviour, according to University College London (UCL) professor of psychology Adrian Furnham.
He said it is useful to look at what money means to people, and these associations can fall into four categories:
"For some people, money represents security, and they want to protect it and hold onto it. The second is that money represents power, and without money you are weakened by every sense of the word.
"Controversially, evidence suggests there are sex differences with regards to the way people think about money, and there is evidence to support this. Money can also be a way of trading affection - as some think that to have money, means to have love, and be accepted or rejected by how much money they have.
"Finally, some believe money represents freedom, and the lack of money chains them. Once you ask people these questions, you can get into their hearts rather than their heads."
Furnham also said suggested asking the following questions, in order to target each member's individual needs.
"The first question which needs to be asked is whether the individual is a spender or a saver, and the second is to ask whether the individual is money savvy. Once you have the answer, you know that you can begin to target a clear message."
Schemes can improve communication with members by developing an effective strategy, and using various behavioural techniques. It will be interesting to see if schemes make more use of the available tools to better engage and communicate with workers, as well as address individual member needs based on their perceptions of money.
More than half of BlackRock’s flagship UK defined contribution (DC) default fund’s assets will be invested in ESG strategies by June 2021.
Technology platform PensionSync has partnered with quantum employment pioneer My Digital to help contractors and employers manage pensions as more workers do temporary work for multiple firms.
Capita Pensions has partnered with data technology solutions firm Intellica to tackle the GMP equalisation challenges facing pension schemes.
Graeme Bold says the right communications can improve both the level of savings and the outcomes for savers.