BEHAVIOURAL BIASES
While most of the industry is still getting to grips with these concepts, some have taken the first steps. State Street Global Advisors (SSGA) has recently looked at how communication techniques can be used to increase engagement and pension contributions.
Working with The People’s Pension and The Pensions Advisory Service, SSGA looked at how behavioural biases shaped the attitudes of men and women towards pensions. The purpose of the report was to
determine how these different biases between the genders could be used to better shape communications.
Sophie Ballard, senior DC relationship manager at SSGA, says: “Many of the key messages which emerged from that report were broader than differences between the genders.”
The thesis tried to determine whether men and women responded better to positive or negative messaging. Ballard says: “The theory was women are thought to be more risk averse so they would respond better to negative language – such as protecting their savings.
“First, we observed the way people spoke about their pensions on the TPAS website,” she adds.
It was noticeable that most people spoke about their pensions in a negative way, focusing on preventing loss. “Over 68% of the words used were prevention focused,” Ballard says.
SSGA thought that mirroring the language people use would elicit the best response rates – as this was the language they were choosing to use when discussing pensions. Ballard says: “But when we actually tested both negative and positive language, it turned this thesis on its head.”
Testing negative and positive language to see which would make people take action showed a universal preference for positive language – there was no substantial difference between how men and women responded.
Ballard says: “Although there were some differences in different age ranges or income levels, the overarching message was people preferred positive communications.”
The positive messages with the strongest response rates were: “Save your retirement: improve your chances later in life by increasing your pensions savings” and “Grow your pension savings: build a pension pot and help it grow with our award winning workplace savings scheme”. These messages encouraged members to take actions to improve their retirement outcome.
In contrast, negative messages such as: “Ignoring your pension planning? Have you been ignoring your plans for later life? Prevent disaster and start saving today”, not only didn’t engage people, but induced a negative response – people were less likely to take action than they had been before seeing the message.
Even an appeal to parental responsibility did not work. “Protect your children via your pension: find out how saving for later life can shelter your children from financial stress.”
Ballard says: “We thought that would have a big impact but it didn’t at all!”
Using positive language resulted in many more people taking action to increase their pension contributions.
Ballard says: “Using language like ‘aim’, ‘reward’, ‘gain’, ‘grow’, ‘happy’, ‘success’ and ‘excited’ is an effective way of talking to members.”
It’s likely the negative language used by people when they were talking about pensions on the TPAS website is a reflection of how pension providers communicate rather than an accurate reflection of what type of language elicits better responses. “The industry needs to be much more positive about the language it uses in relation to pensions as it will encourage members to put more into their pension pot,” Ballard says.
