Bridging the pensions knowledge gap

As someone who works in the pensions industry, when I'm asked, "What comes to mind when you think about your pension?" my thoughts are immediate and varied.

Questions like “Am I saving enough now for my future life after work?” and “Should I adjust my current investment strategy?” often come to mind. I also wonder, "When can I realistically afford to retire?" or "Should I opt for an annuity or a drawdown product?" On top of that, I keep an eye on whether new Government policies might change tax reliefs and tax-free cash rules. And I ask myself, "Have I contributed enough National Insurance to receive the full State Pension?"

Ahead of our spring Defined Contribution (DC) conference, we posed a similar question to people in the street: "What does the word ‘pensions’ make you think of?" Their responses, as individuals outside the pensions industry, were as diverse as expected. While some viewed pensions as "super important" and a key part of their financial future, others saw them as something only for "older people," describing pensions as "complex," "confusing," or even "painful."

The pensions knowledge gap

Many of us working in the pensions industry recognise this gap between what we know about pensions and what the wider public think and understand about them.

In 2023, Phoenix Group partnered with the National Centre for Social Research to examine people’s knowledge on pension issues. It found that:

• 58% of adults reported low confidence in their knowledge of pensions. Over a quarter (28%) stated that they knew little or nothing about pensions, and just 11% reported having good knowledge of pensions issues.
• 65% said they knew little or nothing about workplace pensions.
• 60% said they knew little or nothing about private pensions.

Phoenix Group's research also found that members are often unaware of how life events can impact their workplace and state pension savings. As an example, many people do not understand the impact that changes to their working hours or contracts could have on pension contributions.

Information overload

There could be many reasons why people don’t engage with their pension savings. Our small sample of members in the video reinforces our experience that many see pensions as complex. They often feel overwhelmed with how much information there is to digest. Many younger people see pensions as something to worry about when they’re older, they also find pensions savings an additional unaffordable cost or “hit to their pay-packet.”

Keeping it simple

Given the current low levels of understanding around pensions and the risk of overwhelming members with too much information, it's crucial to adopt communication strategies that educate members gradually, providing small, digestible pieces of information on a regular basis.

Industry-wide awareness campaigns, like Pension Awareness Week and Talk Money Week, are excellent starting points for this. These initiatives can be seamlessly integrated into a scheme's communication strategy and are designed to boost people's basic pension knowledge. The latest "Pension Attention" campaign, for example, delivers straightforward, bold, and memorable messages to help simplify pensions for the wider public.

However, research shows that while national campaigns are a useful first step in raising awareness and fostering understanding, they often fall short unless they are followed by more personalised, targeted communications that resonate with specific audiences. Tailoring the message to individual needs and preferences is key to ensuring lasting engagement and deeper understanding.

That is why having a tailored communication strategy for each pension scheme is so important. By using segmented messaging and clear, actionable steps, schemes can craft strategies that not only inform but also influence how members feel, think, and engage with their pension savings.

Personalisation

Personalisation is key. Schemes should regularly analyse their membership’s demographic data. This will help them to better understand more about their members’ financial circumstances and behaviours to develop targeted communications that are meaningful and useful to them. Strategies should aim to provide simple, relevant information to members at a time when it’s important for them. For example, when they join a scheme or make important life changes.

Personalisation is rapidly becoming one of the most powerful trends in communication and marketing, with technology advances now allowing for highly targeted approaches. For example, social media adverts can be tailored to reflect a user’s personality type and preferences. While pension schemes may not yet have access to such granular data, there is significant potential for more personalised pension communications.

Here are two simple yet impactful ways this could be done:

1. Tailoring the level of detail or technical complexity in letters, nudges, and guides based on each member's recorded preferences.
2. Moving beyond the binary choice of either all hard-copy or all-electronic communications. Members could have the option to mix and match, receiving, for instance, a hard-copy benefit statement but opting for the annual newsletter electronically.

Pension schemes can gather this type of preference data through targeted or mini feedback surveys.

Just because members may not feel confident in their pension knowledge now doesn’t mean they don’t want to be. As an industry, we must continue improving our understanding of members' needs and use emerging technologies to close the knowledge gap. If we want to truly enhance retirement outcomes, we need to start meeting members where they are and offer the support they need.