Talking to disengaged pension savers about responsible investment and ESG issues might not be a highly effective way to engage people for the first time, according to new research from Nest Insight.
Nest Insight’s new research, published today, calls into question the widely held belief that talking to disengaged pension savers about responsible investment and ESG issues is a highly effective way to engage people for the first time.
The study, funded by Legal & General Investment Management (LGIM), examined whether responsible investment communications can engage pension savers who have never logged into their pension account more effectively than standard approaches. A behavioural email messaging trial with 35,000 unregistered contributing Nest members was used to assess the real-world impact on engagement levels, with open rates, click-through rates, and account registrations measured.
The research found that a standard account activation email with no mention of investment or responsible investing resulted in higher open and click-through rates than emails discussing responsible investment.
These findings suggest that responsible investment communications should be handled with caution, depending on the target audience and the engagement goal. A straightforward message or personalised communication may be more effective in prompting people to engage with their pension account for the first time in a disengaged audience.
According to the study’s findings, the first step in the engagement journey in which people are encouraged to log into their account for the first time could be a significant door opener to other forms of engagement and action. 88 per cent of those who registered their account said they knew how much they contributed to their pension, compared to 74 per cent of those who did not register their account. Compared to 69 per cent of those who did not register their account, 80 per cent knew how much their employer contributes to their pension each pay period.
In comparison to 34 per cent of those who did not register their account, 52 per cent knew how much they would have saved in their pension by the time they retire, 69 per cent knew the current value of their pension pot, compared to 40 per cent of those who had not registered their account and 42 per cent knew how their pension pot was invested, compared to 27 per cent who did not register their account.
The findings of this trial show how messages about responsible investment can help reach out to disengaged pension scheme members by driving engagement among people who say they care about ESG issues, assisting people in engaging with the concept of investment or building awareness that pension savings are invested, and building trust in pensions and scheme providers.
Nest Insight director of research and innovation Jo Phillips says: “Our research findings suggest that there could be quite a wide gap between the pension industry’s interest in talking about ESG and the current appetite of some scheme members for hearing about it. However, it’s important to remember that the emails tested in this trial were designed to prompt the very first engagement among an unengaged group of pension savers. It’s quite possible that we’d see different results among savers who are further along their retirement saving engagement journey.
“It’s also clearly true that some people are highly motivated by ESG issues, and awareness of the relevance of these to pension saving is growing. If communications can be tailored and targeted to those who care about ESG issues, then the research indicates that these messages could indeed be effective. But personalisation is key. Information about responsible investment should be shared with those who want to find out more, but in a way that isn’t daunting or off-putting for others.
“There are many outstanding questions around what role responsible investment could play as a motivator of pensions engagement. We need to better understand how the patterns we saw in this trial might vary in different settings, such as with different target audiences, in the context of different schemes and at different touchpoints. We’re keen to explore this further as our research programme develops.”
Legal & General Investment Management co-head of DC Stuart Murphy says: “As an industry, we have a critical responsibility to find ways to educate, support and empower our members on the benefits and impact of their pensions savings on society. This research shows that we must adapt the way we talk to members, using straightforward language and focusing on subjects that matter to them.
“While terms like ESG and responsible investment may not always spark initial interest with members, we know they want to feel consulted about how their retirement funds will shape corporate activity, society at large and how it can make a real difference to the planet.
“At a time when DC pensions need more voluntary contributions, more understanding and in general more interest from members – it is clear that we, as an industry, need to do better in tailoring the way we communicate to ensure that we encourage them to fully engage with their pensions.”