Changes around the use of language could help people in their 50s and early 60s to start taking small but important steps to prepare for retirement and avoid making potentially damaging decisions, according to new industry research.

The research, published by Invesco, Invesco Consulting, Maslansky + Partners and Nest Insight, revealed that while self-reported levels of engagement were found to increase as savers approach retirement age, overall levels of engagement remained low.

For instance, the study found that only eight in 100 people in their 50s and early 60s have had a call with a free pensions advice service or spoken to a financial advisor, while fewer than one in five have used an online calculator to work out their retirement income.

According to the research, this lack of engagement could be a result of a number of barriers, with respondents highlighting affordability concerns, as well as being unsure of the best steps to take, feeling overwhelmed by the process, or assuming that it’s too late to make a difference.

However, the study found that using certain language can make a "tangible difference" to people's readiness and ability to seek out guidance and information.

The messaging tested included reframing a pension as an income in retirement, encouraging savers to start simple and take gradual steps, ensuring that the member feels in control of their pension, and urging members to talk to friends and family.

These messages, tested among 1,500 pension savers in their 50s and early 60s, resulted in a "significant positive impact" on people’s intentions and outlook, according to the research.

In particular, the research recorded a nearly 64 per cent increase in the number of people who plan to arrange a call with a free government pensions advice service or speak to a financial advisor.

This was in addition to a 57 per cent increase in the number of people that feel in control of their pension savings, and a 48 per cent increase in the number of people who intend to use online tools and resources like calculators or advice forums.

There were concerns over some of the unexpected consequences, however, as messages such as 'you control your pension' were interpreted by some as 'taking control' by accessing pension savings as sound as possible.

Indeed, messages around an income in retirement were the only ones to discourage people from thinking that their pension savings are there for them to access as soon as they can, prompting a 19 per cent increase in the number of people who disagree with this idea.

Commenting on the findings, Nest Insight director of analysis, Matthew Blakstad: “Many people in their later working life are shying away from preparing for retirement, and this isn’t surprising.

"Lots of savers will have built up their pension pots not by taking any action, but by following the default settings of auto enrolment pension schemes.

"However, when approaching retirement, people are faced with the need to pick their own retirement products from a complex and evolving marketplace. Very few feel equipped to make such an important decision.”

Adding to this, Nest Insight research and innovation director, Jo Phillips, said: “There’s a concern that many people are making snap decisions, taking all the money out of their pension and moving it to their bank account – somewhere they’re familiar with and where they feel in control of their savings.

“But, unless the individual has some immediate need for this money, they will probably be worse off because those savings will attract little or no growth or inflation protection, and they may face additional tax penalties.

“Our research looks for ways to help people understand all their options in the run up to retirement and to seek out the guidance and information they need to make the right decisions for them about how to use their pension savings.”

Invesco head of UK strategic institutions, Steve Messenger, also stressed that while messaging alone can’t overcome the wide range of barriers pension savers face in later working life, it could help people to start taking the right steps to seek guidance.

“It’s widely recognised that good communication is one of the greatest barriers faced by DC schemes and the study provides practical steps schemes can take to communicate with their members, at this critical stage of life, combined with a demonstrable uplift in their engagement as a result," he stated.

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