Smart default schemes should be designed to ensure that members do not have to “engage repeatedly” throughout the life of their pensions, it has been suggested.
Speaking at the Pensions and Lifetime Savings Association (PLSA) annual conference today, 17 October, The Behavioural lnsights Team director of consumers, economic growth and energy, Elizabeth Costa, said that it was important to get the decision right when getting members onto the scheme in order to ensure their pathway is easy going forward.
The Behavioural Insights Team has been working closely with the Money Advice Service (MAS) and much of the industry to understand what drives peoples saving habits.
Costa said: “Prompts is about using your communications to engage with customers and the other is the flip side which is designing defaults so that people don’t have to engage repeatedly throughout the life of their pensions.
“My piece of advice would be, when you first get members into the scheme, to set those choices really carefully and allow people to make active choices about how much they are going to contribute and to put them on a good path going forward.”
Costa also stressed that it is important to use communications in order to engage members, but that there is a limit to the effectiveness of nudges.
“I think we haven’t done enough testing to say imperially what that level is and I’m sure that it differs across markets, based on factors of how interesting the product is, how consequential it is on peoples lives … there are a lot of different factors that affect how engaged people are. What we are seeing from trials of consumer engagement is probably around the 10 per cent level,” she added.
According to Costa, the partnership will be taking forward four ideas with leading fintechs and retail banks to help people increase their savings.
The first of these partnerships will be announced at Talk Money Week in November.