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An App-etite for Pensions? Engaging Millennials in a Freedom & Choice World

Blog - 18.07.2018


Part 4 of our series looking at improving Millennials engagement with retirement planning sees Tom Hibbard explore the possibilities Behavioural Economics might offer in potential solutions.

So how do we make things easy but Effective? As Einstein famously said, “any intelligent fool can make things bigger and more complex; it takes a touch of genius and a lot of courage to move in the opposite direction”. A Pensions Dashboard has been discussed many times before and there is now one on the way, but I would take this one step further and create a Personal Finance Dashboard - a sort of financial health centre with pension, current account, credit card, insurance, loans etc. in one place. If the pensions element was interactive, which it doesn’t look like it will be on the version in development, people could play around with different variables and see what happens to their money, which would help engage the so-called ‘generation tech’.

How do we make things Attractive? This is where we need to design advertising and products in a way that puts pensions on young peoples’ radars. Present Bias, for example, that I mentioned previously can be overcome to a degree by showing people how life could look if they save more now. Aviva’s ‘Shape My Future’ social experiment/advert allowed people to live for a week as they would in retirement based on the amount they were currently saving. As soon as people experienced the life they would have to live if they did not save enough, they immediately realised the need to change the way they engaged with their pension.

Using other behavioural ‘tricks’ like introducing lottery tickets, for example, is an idea that has been put forward as people think their chances of winning are far higher than they really are. The employee would get a lottery ticket for every £100 they paid into their pension with the chance of winning an additional contribution from the employer. Something as simple as changing a name can also have a large effect on the way people view it. A ‘Savers Bonus’ for example sounds much more appealing than tax relief!

How do we make things Social? This is the process of making something seem like it is common practice amongst a peer group. This can work both ways though, as scare tactics can unintentionally convince someone that everyone else is in the same position, giving the feeling of safety in numbers. Using this power in a positive way means we can convince people that their cohort are already doing something they know they should be doing. This pressure to do the same thing can be combined with the dashboard for instance, where friends can be connected and see what each other are paying in to their pension as a percentage of their salary. This is just one example of many ways this can be done.

How do we make things Timely? The final part of the EAST framework is all about when we introduce change. A programme that two behavioural economists, Richard Thaler and Schlomo Benartzi, came up with which is widely used in the U.S. is the ‘Save More Tomorrow’ initiative. This aims to increase contributions in line with nominal pay rises, although this has been made more difficult in recent years due to the economic environment. It is well known that people hate to see their take-home pay fall and this scheme allows them to pay more into their pension over time, whilst still seeing their take-home pay rise.

The moral here is that we can’t continue to rely on outdated solutions that are no longer effective. It’s time to turn to more radical and newer ideas and in the final part, we’ll look at what the tech giants themselves could do to help.


Looking for another entry in this blog series?


On the Road to Nowhere? Engaging Millennials in a Freedom & Choice World

Part 1
Do I even have a Pension? Engaging Millennials in a Freedom & Choice World 

Part 2
Way too young to be thinking about a Pension? Engaging Millennials in a Freedom & Choice World

Part 3
Maths, English, Science and… Financial Planning? Engaging Millennials in a Freedom & Choice world

Part 4
An App-etite for Pensions? Engaging Millennials in a Freedom & Choice world

Part 5
Alexa, increase my Pension contribution. Engaging Millennials in a Freedom & Choice world