Positive investment impact communications could improve member engagement - Nest

Talking about the positive impact of pension investments could increase engagement and trust amongst savers who care about environmental, social and governance (ESG) issues, according to research from Nest Insight.

The report, support by Legal & General Investment Management (LGIM), found that four in 10 respondents would be most likely to read and act upon information about responsible investment.

This compares to three in 10 who stated they would be most likely to read and act on communications with no mention of responsible investing, or where responsible investing is a support message.

In particular, scheme members had a preference for communications focusing on investments proactively doing good, with six in 10 members preferring to hear about the local, rather than global impact.

Furthermore, the term ‘responsible investment’ is more likely to engage savers than ‘ESG’, with five in 10 respondents viewing a responsible investment explanation of pension investments as best, compared to three in ten for the ESG scoring description.

The research also found that ESG education can improve member trust in pension providers, with respondents ranking their trust in their pension provider before learning about ESG at 6.8, compared to 7.8 after.

However, the report clarified that 5.5 in 10 savers with low engagement in both ESG issues and pensions stated that they would be more likely to read and act upon communications with no mention of responsible investment at all.

In addition to this, the report emphasised that many saver remain unaware that their pension pot is invested at all, with three in five respondents saying they do not really understand pensions.

Considering this, it emphasised that before talking about responsible investment with pension savers, providers and trustees must first build up member understanding.

In light of the research, the report identified five principles for effectively communicating with savers, which includes ensuring personal relevance, including credible evidence and proof points, and avoiding jargon,

It also noted that despite the positive story around responsible investment, people need reassurance that this comes without sacrifice and that the essential features of a good product are uncompromised, as well as understanding that it is a 'win/win'.

Commenting on the findings, Nest Insight director of research and innovation, Jo Phillips, stated: “With increasing evidence that workers are motivated by social issues and environmental concerns, many in the industry are interested in the idea that talking with people about the impact of their investments could be a potential hook to drive savings behaviours that lead to better retirement outcomes.

“It’s certainly an approach that the Nest pension scheme has been pioneering for some time. Our research programme with LGIM aims to explore this theory and build the evidence base for how this could work in practice.

“The results from the first stage of our research give us reason to be cautiously optimistic that talking to pension scheme members about responsible investment could lead to positive behavioural and attitudinal outcomes, at least for some people.

“But, while the potential for a new engagement route clearly exists, we believe there is more work to be done for that to be realised.

“Part of this involves pension providers and trustees raising awareness among their members that they have a pension, and that it is invested for growth to give them an income in retirement.

“We also know that there’s often a difference between what people say they will do and what they actually do, so in the next stage of our research programme we’ll be trialling some of these messages in a real life-setting, at scale, to observe any differences in people’s behaviours.”

LGIM head of DC, Emma Douglas, said: “Savers are not just interested in building as much as possible in their pot but also in the impact their investments are having on the world around them.

“They are more interested in engaging with their pension once they know about the social and environmental impact of their investments.

“We’re delighted to be supporting this Nest Insight research, which we believe will add significantly to a practical understanding of how providers can realise this potential for greater engagement”

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