What is the role of engagement in a pension system that relies at least partially on inertia to increase coverage?
That question is one that is being increasingly asked by pension professionals. There is a sense that nudge-based auto-enrolment has got us so far, but a more retail- focused user experience is needed to get savers further both in terms of contributions and better decision making in the approach to retirement.
Gallagher Communications director, retirement communications, Karen Bolan says we need to shift the dial on AE communications.
“AE has created a generation of people who believe that they have got the pensions box ticked when in reality, at minimum AE contributions, the pensions box is far from ticked. Engaging people in the simple fact that they need to contribute more, and the tax benefits of doing so, is a priority. AE relies on inertia and then when an employee approaches retirement, we expect them to be able to make probably the most important decision of their lives. We have to equip people to be able to make sensible, informed decisions.”
Part of the solution, digital engagement, has been given a boost during the pandemic, and may point the way forward.
From apathy to engagement
An analysis of the behaviour of over 165,000 members conducted by Buck in 2020 and published earlier this year suggests that digital engagement through its aminated pension summary tool could see contribution rates double and more.
Buck head of outsourcing Lee Cook says: “Digital solutions that involve members and ‘nudge’ them towards interacting with their pension are a huge step forward in engaging individuals, both at the day-to-day level and in conjunction with any specific exercises schemes may aim to undertake.”
Hymans Robertson lead digital consultant for DC pensions Darren Baillie says that historically, the pensions industry has taken an “education-led” approach that broadly reflects the following thinking: people aren’t saving enough. Why? Because they don’t understand how things work. So, teach them how it works, and then they’ll understand and then they’ll save more.
But, this hasn’t worked. “Explanations for the failure tend to include ‘it’s complicated’, or ‘it’s not today’s problem’. Pensions and investment might be complicated, but it is the industry’s responsibility to make them accessible to the layperson.
“Our experience is that the best engagement strategies focus on member outcomes and facilitating action which supports improvement in outcomes.”
He sets out a different set of assumptions as follows: To help members understand what income they’ll need when they retire; to tell them what income they’re currently on track to achieve; if they’re on-track, reinforce the positive message; if they’re off-track, suggest actions they can take to improve their outcome; monitor ongoing progress, informing the member of any corrective action required along the way.
Simple and easy
Baillie adds that digital solutions need to be simple, easy-to- understand and low friction. He looks at each in turn.
Simple means not asking the member a barrage of hard-to- answer questions before they can do anything. “For example, ‘how much income will you need in retirement?’ is a difficult question, and most people don’t feel confident in answering it. Digital solutions can apply sensible defaults as a starting point to minimise member dropout and then allow members to override settings if they want and as they become more confident.”
Easy to understand means presenting members with the information they need in an intuitive and compelling way. “We live in a world in which individuals are accustomed to accessing enormous amounts of information on a daily basis using their phone or other device. The way they interact with their pension need not be any different.”
Finally, he says that low friction means moving away from the frustrating series of forms and telephone calls members typically have to navigate when making changes to their pension.
“We can replace that with a digital user experience more akin to the best e-commerce sites, where the process is easy to follow and a great deal of effort is put into minimising friction, such as the “1-click” checkout.”
Those comments about retail are echoed by other consultants. Barnett Waddingham partner Damian Stancombe heads the consultancy’s internal creative comms agency Drumroll.
Retail approach
He says: “The Drumroll ethos has been to take a retail type approach into pensions. We tend to talk corporately to our members, but when you peel it back, we are all retail in our hearts. We are trying to create messaging that is more akin to retail, with taglines, brand, sharper imagery. We use tell, teach, involve.
“Most communication is about legislation but if you are going to tell, tell well. Use clear English on a page that is legible. If you are going to move the dial with some engagement, then teach, don’t preach. So not War and Peace. Digitally, if it’s too much or too often, it’s spam. Sometimes the real message is lost in your own noise.
“Last, if you want it to land, you have to involve people with interaction. We have been working on something called game changer, where we are creating personas. The whole idea is you can change where you, are by taking action. That interaction makes things more real. Not slogging through reams of paper, but getting people to realise if they give up one per cent they get a bigger pot and not suggesting jumping to 10 per cent. Nudge and behavioural traits and behavioural science works 100 per in the accumulation phase.”
Of course, the big pension providers can also deploy their substantial heft to reach their wide base of savers and investors to the matter.
Aviva head of digital workplace, savings & retirement Iain Oliver says: “As of June 2021, 1.96m pension customers are registered for our digital pension services on MyAviva.
“Our focus is on helping customers understand the compelling nature of pension investment, as well as answering their core demands with a p e r sonali se d e xp e r i e nce . Responding to these demands with straightforward, friction-free digital experiences is our priority, alongside providing customers with a personalised, engaging experience. We must cater for all customer segments, as well as accommodating different levels of pension knowledge. We’re concentrating our efforts on supporting the majority of customers who need a better understanding of pension planning. Our recent technological developments, together with embedded educational videos, are aimed at supporting and empowering these customers, whilst also equipping sophisticated users with the transactional tools they need.
Native app
“Native app is an app on which the majority of the customer experience is hosted within the app itself, as opposed to linking the customer off to a web experience in the app or smartphone browser. We have accelerated our native app development to in a response to the rise in smartphone usage. It’s helping to encourage customers to better engage with their pensions through digital.
“We have launched mobile app messenger service enabling our pension customers to message us at a time convenient to them within one uninterrupted conversation until their query is resolved.
“Introducing digital, bite-sized, educational videos on topics such as ‘Transferring a Pension’ – which talk through the benefits, what customers need to know, and how to do it – make it easier for the customer to understand and more likely to engage with their pension.” So how much has the pandemic and much of workforce moving to digital working accelerated the change?
Baillie says: “The pandemic has undoubtedly highlighted the advantages of digital solutions and encouraged their use amongst members, particularly those members whose employment situation has remained stable throughout the crisis and who’ve found themselves with
more disposable income. “However, for those less fortunate, job security and making ends meet in the short term have been their biggest concerns so they’re unlikely to have meaningfully engaged with their pension in the last 18 months. We expect the momentum behind the use of digital engagement solutions to continue. However, that is likely to happen against the backdrop of continued economic pressures as we emerge from the pandemic, which will negatively impact pensions affordability and engagement for some members.”
Pandemic acceleration
Bolan says the pandemic has certainly turned a brighter focus onto digital communication.
Gallagher has just issued a white paper which could not be more relevant entitled: “Rethinking member engagement: Digital communication in the pensions landscape”.
Noting TPR’s increasing emphasis on engagement and value, its message to trustees is that ‘those who have responsibility for scheme management need to have a strategy that maximises out c omes through clear communication objectives—and this means taking a long-term view while building insight-driven member journey paths’.
The paper has some interesting things to say about data, its analysis and collection.
It says: “ [You should] track the results of everything you do to demonstrate that ROI on your communications spend wherever possible, then constantly fine tune your approach, messaging and channel framework based on what members are looking for, what they engage with, and what actions they take.”
Segmented engagement
Digital also enables segmented engagement, the paper continues. “With digital experiences, you can create segmented engagement funnels that present the right information to members at key points, matching their current needs. Gather metrics and previous engagement information like opt-outs, sticking with defaults and general ambivalence to pensions, then match these with persona work that moves beyond simple demographics to serve meaningful, targeted and valuable content to the right member at the right time. “Simple automation can capture those that fall out of the cycle with simple re-engagement messages. Segmentation models and messaging can be constantly refined and tested to find approaches that work.”
It is clear from talking to consultants that they are grappling with the engagement challenge. It is receiving attention, best practice is being established, and processes developed too.
Stancombe says clear digital messaging is that way forward though he cautions that you have to remember some people are dyslexic, some have English as a second language (presenting a challenge with written material) and some are partially sighted.
“It is not enough to say we’ve put our newsletter online. You’ve not changed anything. Make it personal, make it video, make it bite-sized. That is how to get people engaged. The mass market needs it. Face to face is too expensive. Digital is the way to do it,” he adds.