Why is financial wellbeing important when looking at pension saving?
‘Financial wellbeing’ is a widely used term, but often with subtly different meanings. Banks, for example, may use this term in relation to managing debt and monthly bills.
At Aegon, we take a more holistic approach to financial wellbeing. It’s about helping members manage their money more effectively, both during their working lives and throughout what could be an extended transition into retirement. This becomes increasingly important as people live longer and need to plan for their ‘second 50’.
Financial wellbeing, however, goes beyond the technicalities of pensions, financial planning, and understanding balanced portfolios, default pathways, or risk-return profiles.
Historically, our industry has focused on creating products and processes for the logical mind, rather than the emotional one. We want to understand the emotions driving financial decision-making so we can better support members, ultimately leading to improved outcomes.
How can this approach encourage members to save more?
One of the most effective ways to encourage saving is through future visualisation. Research shows that individuals who can vividly picture where they want to be in the future are eight times more likely to save than those without this vision.
Most of us know, at some level, that we should be saving more, but making this emotional connection with the future helps us overcome ‘present bias’ and encourages us to save.
Providers need to offer a range of tools and services that support this mindset shift to help people connect emotionally with their future selves, fostering healthier saving habits.
What steps do providers need to take to support better financial wellbeing?
Rather than solely focusing on product innovation, providers should aim to build more connected savings systems, incorporating:
▪ Engagement: The industry needs tools that use emotional connections to genuinely engage members, helping them visualise their future life goals. They also need engage with customers around big money moments to help them understand what actions they need to take to achieve their goals.
▪ Execution: It must be straightforward for members to follow through on these plans otherwise, engagement won’t lead to action.
▪ Right help at the right time: Members will require different types of support at various stages of their savings journey—whether education, guidance, or advice. The key is ensuring members can access the support they need when they need it.
▪ Ongoing support: This is critical to helping members stay on track.
How can technology help improve financial wellbeing?
Technology has a significant role to play. Pension Dashboards will be part of the solution, enabling people to see all their pension information in one place. We’re excited about developing a commercial dashboard, but this is only one piece of the puzzle. It needs to be complemented by tailored guidance and advice options to help members answer real-world questions, like whether to consolidate savings or how best to draw income from their assets.
With this in mind, Aegon is developing its MYLO platform, creating a data-driven engagement model that offers personalised support around key life milestones.
Personalisation will advance further with more sophisticated AI and data analytics, helping providers to tailor messages and refine products and services. This will ensure the member experience aligns and adapts to their specific financial goals. The industry is moving towards a ‘digital-first’ approach, but this does not mean ‘digital-only’. We expect that most members will start online, but many will want
to speak to an expert before they commit to the biggest decisions.
Is financial wellbeing about saving more, or is there a broader goal?
Financial wellbeing isn’t just about saving. It’s about feeling secure and content when you think about your financial future. We want to shift people’s attitudes towards money, helping them feel less overwhelmed or anxious about financial decisions and fostering a more positive mindset around money. This we think will ultimately help them to save more. And it isn’t just about the future; when people take ownership of their finances, it also brings greater satisfaction in the present day too.