AE savers’ lack of pension knowledge highlights need for communication changes

Barriers to members’ pension engagement could be overcome with simple changes to the language used in communications, according to Nest Insight and Invesco.

In their joint-published Beyond the default report, Nest and Invesco found that there was a lack of knowledge amongst auto-enrolled pension savers.

According to their survey results, two in five (40 per cent) auto-enrolment (AE) savers did not know they can choose how much they pay into their pension.

Furthermore, a third (33 per cent) thought AE minimum contribution rates were a recommended level of saving and 68 per cent remained at the default saving rate.

More than half (52 per cent) were unaware of government tax relief on pension contributions and 33 per cent did not know that their employer also contributed to their pension.

Although 91 per cent of respondents were happy about their pension plans, 77 per cent said they were never told to rethink their contribution levels and 16 per cent had never checked their pension balance.

“Very few people increase their contributions over the minimum rates, and there’s a concern that workers see them as recommended amounts they should be saving,” commented Nest Insight director of research and innovation, Jo Phillips.

“Whilst not everyone needs to save more, and indeed for some people it may not be the right option now due to short-term money pressures or costly debts to manage, it’s clear that many people will need to save more than the minimum amount if they’re to achieve financial security in retirement.”

Nest and Invesco noted that although Covid-19 had presented additional challenges to communications about pension saving, it has also presented opportunities as messages about saving for the future may feel “more relevant” to savers now.

However, they also warned that there could be higher levels of anxiety around affordability or saving money for the long term when it may be needed sooner.

The authors urged the pensions industry to adopt the ‘four P’s’ approach to communications by making sure communications are positive, plausible, plain-spoken and personal.

They also highlighted ‘foundational messages’ that can help fill common gaps in savers’ knowledge, including reminding savers they can contribute above the minimum, highlighting that rethinking pension contributions can improve financial security in later life and that contributions earlier in life “work harder” for savers.

“AE has been a huge success and it’s imperative we keep moving forward,” added Invesco head of UK strategic institutional, Stephen Messenger.

“A deeper understanding of how simple language can help unlock the opportunity for people to secure their future is another important lever in helping members get the most out of their workplace pensions.”

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