Pensions: What are your options?

When was the last time you checked how big your pension pot is? Do you know the different options available to you? And are you confident that you have enough money saved up for retirement? 

Pensions are complex and difficult to understand. Over half of people in the UK do not know how much they have saved for retirement, while one-fifth ​​do not know what they can do with their pension pot when they retire. That’s why BIT worked with The Money and Pensions Service on a new ‘smarter signposting’ trial to nudge people towards pensions guidance.

Pension Guidance 

The Money and Pensions Service (MAPS) provides the government-backed MoneyHelper service to help pension savers to understand the options available to them and to help them to make more informed decisions. However, despite the potential benefits of speaking to an impartial specialist about their retirement options, many savers end up accessing their pensions without getting guidance or impartial advice. Finding innovative ways to increase the take up of guidance services will ensure more people get support to make informed decisions about what to do with their pensions. 

Nudging people to seek guidance

Through a number of trials in partnership with MAPS, we’ve already successfully applied behavioural insights to nudge people to seek guidance on their pensions. 

• In 2017, we significantly increased the number of people seeking Pension Wise guidance by simplifying and personalising the information that people receive when they approach retirement. The new single page Pensions Passport, which replaced a 100-page document on pension products, attracted ten times more people than the old information pack sent by pension providers. 
• In 2019, as part of the Stronger Nudge trial, we applied behavioural insights to a call handler script. This script was used by call handlers to encourage those calling their pension providers to access their pension to speak to a Pension Wise guidance specialist before they accessed their pension savings. The revised script explained the nature and purpose of guidance and offered it as a normal part of the pensions journey (“The next step in the process then is to get you booked in for a guidance appointment”). The impact was instant:  the number of people who booked a guidance appointment almost quadrupled. This trial helped inform the evidence base to take a Stronger Nudge forward in FCA rules and DWP regulations that will come into effect in 2022.

Improve signposting to financial guidance 

In our most recent project we collaborated with MAPS and pension provider Royal London to find more effective ways of signposting pension customers to increase take up of impartial guidance. 

Using customer transaction data and predictive analytics we identified pension holders who were most at risk of not having sufficient income for retirement. Those customers stood to benefit the most from guidance on how much they might need to increase their pension contributions by in order to secure a good retirement income.  

To reach out to these customers and encourage them to seek independent guidance we tested three different messages which applied behavioural insights. 

• The first used the subject line “We are looking out for you” highlighting Royal London’s duty of care towards its customers. 
• The second emphasised the targeted and personalised nature of the message, by saying “This is meant for you”.
• The third aimed to encourage customers to take action by urging them to “Act now, not later”. 

The messages encouraged a small increase in the number of customers taking up guidance from MAPS’ general pensions helpline. Some customers called the pensions helpline to gain reassurance on the pension plan they had already put together with their financial adviser.

It made me feel that I was on the right track and that I had been doing all the right things, and that my future ideas for what I might do were quite appropriate.

Other customers who were in a less stable financial position sought support to develop a retirement plan. For these customers, guidance was seen as a stepping stone to engaging with financial advice, demonstrating the potential of guidance to help customers foster a more thoughtful approach to pensions.

I’m more aware that I should be investing in my future self, rather than spending it all now, just because I’ve got it now. It’s making me think about things a bit more.

I hadn’t really thought about: how much do I want from my pension or when will I retire? That all came up through the session. Then, I came away with loads more questions and things to consider.

What’s next? 

Pension providers and financial institutions more broadly have a wealth of data that can be used to identify those customers who would benefit from guidance or advice.  These customers can then be signposted to the most relevant support at relevant moments. Through open banking data sharing is becoming more common. This data could  be used to identify changes in financial circumstances such as salary increases or decreases, or patterns of spending and credit repayments that indicate spiraling debt. Financial institutions could use this data to send timely signposts to the appropriate support to the customer’s financial circumstances.

Behavioural approaches and the design of good signposting can encourage pension customers to seek guidance, and support those looking to gain reassurance about existing pension plans or to develop a retirement plan. Good signposting to guidance can support customers as a stepping stone to engage with regulated financial advice.

Our work with Royal London is part of our Financial Capability Lab partnership with MAPS which gives us the opportunity to work with private organisations to design and test new ideas to help people manage their money better. BIT are always looking for new partners to work with so if you work for a financial provider we’d love to talk to you, please get in touch with [email protected]. 

If consumers have questions about any aspects of their pensions, they can receive free, impartial guidance from MoneyHelper by calling 0800 011 3797. This service is available to all.  Those over the age of 50 who specifically want to understand their options for accessing their defined contribution pensions should contact Pension Wise, which is also delivered by MoneyHelper.