Life events key to engagement, report finds

The engagement problem has not been solved in the three years since the freedoms were announced, as many people still only start thinking about pensions once they approach retirement.

A report by the Pensions Policy Institute released on Wednesday on consumer engagement finds that interventions are most effective when they happen during financial or life transitions and thus relate to people’s circumstances and goals.

Allowing for simple follow-up actions is crucial, the report notes, and says personalised contact is normally required to support people in their decision-making.

Daniela Silcock, head of policy research and a co-author of the report, said that for ‘teachable moments’ to be identified, it is necessary to know what organisations people come into contact with during those transitions, “and then having them provide information and referrals”.

While the report itself does not make any recommendations, Silcock said such personalised information – generally given face-to-face or on the phone – could be financed by employers, providers, or the government through levies on the industry.

Engagement is not a panacea

But Silcock warned that engaging people too early can be risky.

“If you motivate people to make decisions without giving them support to make those decisions in the best possible way [it could be that] they make decisions that lead to negative outcomes,” she said.

She therefore argued that for people with less financial knowledge and savings, “defaults and compulsion can play a role in protecting them from making poor financial decisions”.

Darren Philp, director of policy and market engagement at mastertrust The People’s Pension, which co-sponsored the report, said the key will be to put the report findings into practice.

“We’ll have information about people’s ages, but we wouldn’t necessarily have information about people’s marital status, or we wouldn’t know if they have kids, so there is a bit of a translation gap to translate this from theory into practice,” he said.

Philp stressed the role the digital space could play in bringing this information together. “The real innovators will be the ones linking up with the social platforms,” he said.

However, “data protection is a huge issue on this and that’s one of the key challenges that have to be overcome”.

Pension providers are among those that have information about individuals.

Kate Smith, head of pensions at provider Aegon, said while they already provide support, more could be done.

“We would like to contact employees or members of our schemes more directly, perhaps via emails; or we could do push notifications to them at certain times, based on what we know about them,” she said.

“It’s not the same as having a conversation, but of course they could ring us, do webchats,” Smith added.

Banks could be drafted in

But it is not just the providers that hold information on individuals. Smith suggested that every time people want to make a financial transaction such as accessing debt or opening a bank account, they could be given information.

Steve Webb, director of policy at provider Royal London, said the concept of teachable moments was a good one.

He suggested giving people a leaflet three months before their student loan is paid off, for example, to encourage them to save before they get used to an increase in their net salaries.

People could also be given information when a child’s birth is registered.

In order to encourage people to act on the information, it should be made easy for them to do so, for example with a freepost envelope.

“We know the easier you make it for people, the more likely you are to get a response.”