Targeted communication can lead to a significant increase in members engaging with guidance tools and a “meaningful” 50 per cent reduction in retirement shortfalls, according to L&G.
These were among the headline figures at a presentation at Corporate Adviser’s Master Trust and GPP conference, looking at how pension providers can transform engagement.
L&G senior business development director Gordon Thomson said that engagement needs to be about more than simply getting clicks from members on an app, but instead should be measured on whether it results in better member outcomes.
He said L&G behavioural science team has been looking at how confidence gaps, friction costs and information overload can prevent some members from moving from ‘awareness’ to ‘action’ and these insights have fed into work on its new digital guidance tool.
This uses more personalised communications, nudges, simplified choice architecture and scenario-based prompts to encourage savers to access guidance tools and use them to develop and refine their own retirement plans.
Thomson outlined the problems the pensions industry has had with engagement — pointing out the only 12 per cent of those over the age of 55 saying they have sought online pensions guidance, with a third of customers saying they lack confidence the it comes to “understanding and making decisions” about pension savings.
This may be reflected in the fact that many are making sub-optimal decisions at retirement he said, with half of DC pots accessed for the first time fully withdrawn.
However Olasumbo Biobakue-Mason, head of DC member proposition for L&G, said lessons can be learned from the retail sector, where engagement rates with consumers are far higher. This has fed into its work on digital guidance and communications, and is resulting in more meaningful engagement with older pension savers. She says the providers is looking to roll this out to younger savers in the near future.
Biobakue-Mason said there is clear evidence that members are responding to more targeted engagement via personalised emails, and a a result are 2.6 times more likely to start a guided plan, when compared to those who received the standard ‘wake up’ pack communications.
In total on in three of these members has used L&G guidance tools to create a full retirement plan, and more than 5 per cent seeking further support.
Thomson said that as result of members engaging with these tools, there has been a 50 per cent reduction in members facing a shortfall after adjusting their plan.
He also pointed out that people were four times more likely to buy an annuity where compared to those who have not received targeted communications or engaged with these guidance tools.
Thomson said that this engagement become ever more important with the introduction of guidance income solutions, designed to help non-advised member navigate pensions freedoms.
L&G says it is looking to provide a “one pot solution” that offers flexible drawdown with later life annuitisation. Thomson said L&G was looking to offer multi-asset growth investment, with “dynamic” guardrails in place that would look to offer guidance on spending and withdrawal, particularly in periods of market turmoil.
In the presentation L&G argued that behavioural science will be a key part of delivering default retirement solutions and will move from the margins to the mainstream of DC design. For master trust and GPPs the implications is that success will increasingly be judged by measurable behaviour change of member, and how this impact outcomes, rather thanks solely the numbers who are checking pension balances or clicking on an app.
