The way value for money information is presented can have a major impact on how pension savers choose products, according to new research from People’s Pension and the Behavioural Insights Team.
The study, ‘Testing the impact of value for money metrics on pension decision-making’, found that clear and well-designed Value for Money metrics help consumers identify higher-quality pension products more effectively than traditional factsheets.
The online experiment, involving more than 5,000 UK pension savers aged 25 to 55, compared five ways of displaying value for money data, from detailed fact sheets to simplified red-amber-green ratings.
Participants shortlisted three pensions from eight unbranded options to test how presentation affects decisions. The experiment found that presentation had a strong impact, with detailed fact sheets trusted but often hard to interpret.
The study compared different formats, including the Net Benefit metric, which combines returns and charges into a single pound figure. Meanwhile, the red-amber-green ratings summarise performance, cost and service. Additionally, a disaggregated format showed separate scores for investment, charges and service.
The research found that more intuitive and detailed formats led to better outcomes. The five-point red-amber-green rating and the combined Net Benefit and Service rating led to stronger shortlisting decisions than the standard factsheet or the simpler three-point rating. Savers using the five-point scale were more than ten percentage points more likely to pick the highest-quality pensions. The Net Benefit metric also helped them focus on real value.
But the research also found that more information did not always help savers make better choices. Full factsheets were trusted but often caused information overload, making comparisons harder and leading participants to rely on simple rules. Meanwhile, the disaggregated rating was popular but did not improve decisions.
The Behavioural Insights Team recommends testing to ensure metrics guide savers rather than confuse them. The research comes ahead of the FCA’s consultation on Value for Money metrics, with People’s Pension urging a consumer version on private-sector dashboards to improve transparency and informed decision-making.
BIT head of consumers and business markets Sujatha Krishnan-Barman says: “A well-designed Value for Money metric can help people make the right choices for their pensions. Testing and validating these metrics in the real-world is the only way to fully understand how they will affect consumer decisions. It’s important that the industry and regulators consider how they can be developed to make them consistent, comparable, and ultimately in the best interests of consumers.”
