Research this month by Phoenix Insights found that nearly half of the UK population are not confident in their ability to save enough for retirement.
FSF spoke to Catherine Foot, Director of Phoenix Insights and Sangita Chawla, Chief Marketing Officer at Standard Life, part of Phoenix Group, the UK’s largest long term savings and retirement business, about what pension providers can do to address this.
The recent research finds a worrying lack of confidence amongst customers in their retirement – why do you think this is?
Catherine: The answer to that is different for different people. The Longer Lives Index is based on research with over 16,000 people over 25, and looks at five critical dimensions of life that will help to determine how people fare in later life and retirement – savings, work, health, housing and financial support to and from family and friends. Different people lack confidence to different extents and for different reasons across each of these dimensions. Savings – having enough savings for the retirement they want – was the area overall that people feel least confident about. And for 2 in 5 of those people not confident in their savings, they told us this was simply because they cannot afford to put aside money for later life. And of course the current cost of living crisis is exacerbating this – 41% of people say they will need to use some or all of their savings to cover their increased costs.
Our research reveals other concerns too. 10 million people in the UK are not confident in their ability to secure good enough work up until retirement, and are worried that factors like ill health, discrimination or not having the right skills will stop them from earning and saving what they need.
What can pension providers and employers do to better engage customers?
Sangita: To better engage customers, it is vital to understand and always consider the diverse needs of different members of society. This allows us to provide products, solutions and support that reflect people’s different goals, life stages, attitudes, behaviours, wants and needs.
We use our segmentation model to design our ‘always on’ communications, based on age/life stage, wealth, level of confidence and many other factors. We are always evolving this model to consider other factors identified in our research, to ensure the model remains as relevant and tailored as possible.
Our client analytics tool allows us to map pension scheme members to each of the segments in our model, highlighting gender differences in schemes for example. This allows us to create bespoke, multi-media engagement plans and track them against agreed key scheme metrics.
For example, we produce personalised videos with a real-time pension statement that show what’s in your pension now and at retirement and the impact of upping your contributions. We also segment much of our customer content by age and life-stage so that the articles we produce are relevant and pitched at the right level for different groups.
Our research shows that barriers to engaging with finances include complexity and jargon. So we work with plain English industry experts to keep our communications as simple as possible. In addition, we have just partnered with the social enterprise Plain Numbers, alongside the Association of British Insurers, to make numerically focused campaigns easier to understand and engage with. We are setting up a training programme for colleagues to build our own capability in this area. We’ve also signed up to the ABI/PLSA campaign to run an engagement season this autumn in which pension providers will pool resources to run a sustained campaign of activities put pensions front of mind.
Understanding how our brand resonates with all customer groups is important. This is why we introduced new photography and a suite of illustrations, to better represent the people we look after. This year we are looking for independent experts and groups of people who can help evaluate our visual identity and tone of voice across key areas: disability; ethnicity; age; gender.
More generally, we take a multi-channel approach to member engagement so that no matter how a member chooses to interact with their retirement savings and us, we are here to support them every step of the way. For instance, to support multilingual communications our mobile app can be translated into all languages in Google Translate.
Phoenix Insights seeks to re-examine traditional perceptions as people live longer lives. Can you explain the thinking behind this and why retirement needs are changing so drastically?
Life expectancy has increased significantly in the UK over two centuries, thanks to developments in public health and science. But these longer lives are stretching our mid-20th century model of life beyond breaking point. The basic maths of our lives simply doesn’t add up anymore. In a country where many of us could spend up to a third of our adult life over the age of 65, can 30 years or more of retirement be sustained by 40 or so of years of working?
If we are truly going to make the most of the incredible gift of longer lives (and create a society where that gift is available to all of us, not just the wealthy) we need to leave behind the outdated model that see life in essentially three stages of education first, then work, and then retirement. In its place, we need a new model that enables more of us to live much more flexible lives, where we take career breaks, work flexibly, make time to retrain and reskill and return to education as adults, to care for children, partners and older relatives when they need us, work into our late 60s and 70s if we can and want to, and live more balanced and purposeful lives.
The firm has talked about the importance of “financial security” as opposed to simply selling products. To what extent do financial services organisations need to re-examine their role and how they can go to market?
Sangita: We know that financial security is directly linked with stress levels – when people feel that they’re managing their money well and have provisions in place for the future, worries about money tend to go down.
A pension is often the longest term financial relationship people have, and regularly paying into this has a direct impact on future financial security.
If we want people to keep paying into their pension, we have a role in helping them manage all of their finances, and helping them with broader propositions that aid their financial wellness – at different life stages, according to different sets of wants and needs.
What applications for behavioural science do you see in this space?
Sangita: We see this as essential. The topics we talk about can be complex, so any insight we can get into how to help our customers understand this important information and make better choices about their money is critical.
We work with our psychology behavioural partner, Cowry Consulting, to design and test communications from a behavioural science perspective – ensuring that these are as impactful and digestible as possible. Over 60 colleagues have been trained by Cowry to truly embed behavioural science across our business.
More generally, we use behavioural science in nudging customers towards making good choices – whether that’s logging onto the app more regularly, changing their regular pension contributions or completing essential tasks like updating their beneficiaries.
There are also many ways to use forms of gamification – for example, rewards, badges, quizzes, fun facts – to make pensions fun and accessible for all.
As well as our work on virtual reality in our Innovation Lab, we are working in partnership with FinTech Scotland and TCS’ Co-Innovation and Creation Network to identify innovative partners and products to support with gamification across our digital estate, starting with a focus on Digital Literacy/Digital Adoption and Financial Inclusion.
As well as policy changes, what do you think is needed in terms of consumer education?
Catherine: Government, the financial services industry, employers, charities, and all of us as individuals have a role to play in supporting people to live our longer lives better. We need new role models of people working longer and more flexibly, where retraining and career-switching in mid-life becomes the norm, not perceived as the sign of some mid-life crisis. There have been surveys in the past that have shown that people would rather do the vacuuming than read their pension statement. So we need to find better ways to give us all the opportunity to pause and reflect on the sort of future and retirement we want and what we can do now to help us achieve that.
But policy change is important too. For example, auto-enrolment has enabled millions more people to save for their future, but it needs expanding to cover people like the self-employed so that even if you don’t engage proactively in your financial future, we can ensure that more people will be broadly OK without additional state support.
Image: Ivan Pantic