There are limits to the level of engagement that can be reached, and some people won’t be able to attain favourable outcomes by engagement alone, according to the Pensions Policy Institute (PPI).
The PPI’s Engagement study series’ initial output, “Briefing Note 136 – What is the role of engagement in pensions?,” is an independent Briefing Note funded by USS.
The paper intends to shed light on the current state of pension engagement and emphasises the need to comprehend the constraints and difficulties related to engagement.
The paper highlights how discussions in the DC pensions sector have mostly focused on how to raise member involvement levels. This includes initiatives to spread financial literacy and deepen knowledge of retirement options and hazards.
PPI acknowledges that there are limitations to the level of engagement that can be realistically achieved. Not everyone can be expected to become fully engaged, and some individuals may face challenges in making informed decisions.
PPI proposes that engagement techniques should be tailored to the needs and characteristics of various groups. One-size-fits-all strategies are unlikely to produce the best results.
The report highlights various factors, such as demographic characteristics, financial capacity, and digital capabilities, that affect an individual’s capacity for engagement.
The paper also suggests that engagement can be harmful to some people since it might cause them to make bad decisions, increase their susceptibility to scams, possibly incur more tax obligations, and have a negative impact on their overall results.
Additionally, the use of digital platforms and technologies by many pension companies to engage their members is growing. Information on contributions, options for investments, and projected retirement income is provided by these tools. However, though digital engagement is thought to be more observable, cost-effective, and accessible, it can exclude individuals who are less tech-savvy.
The paper will be followed by a full report, published in January 2024 that explores possibilities for more effective engagement strategies.
