Remember the anti-smoking campaigns of the 1980s, where shocking pictures of diseased organs were meant to make people bin their cigarettes and quit forever? Well, they didn’t really work. What does seem to work, however, are the more recent advertisements that suggest, gently, how you can get support to stop smoking, and how much better you’ll feel if you do.
You might be wondering what this has to do with financial services, but it’s all about ‘nudging’: moving people gently towards a positive outcome, rather than scaring them. And this applies to pensions just as much as it does to tobacco.
We did some lab-based research on how people react to different kinds of communication. This involved recording the brain activity of volunteers as they responded to certain communications about pensions.
First, we showed them potentially frightening messages about retirement – telling them if they didn’t save, they wouldn’t be able to afford even a basic standard of living when they retire. Then we showed our volunteers messages that were softer – suggesting they think about the future and having the retirement they really want, and advising on how they could take steps towards making that become a reality.
What we found is that a ‘scary’ message certainly catches people’s attention in the first instance. But then, instincts kick in, and they want to run away. And it gets worse: in the future, if they see another message – whatever it is, negative or positive – from the same source that scared them, they may not engage with it at all.
So how can employers apply these results? If you’ve just set up a workplace pension – or are about to – you might be wondering what’s in it for you. After all, you’ve got to pay money into your employees’ pensions, which is a cost to your business. But there’s the potential for you to highlight the fact that you’re giving your employees more value – using some ‘nudging’.
After all, you’ve just given your employees an increase in the amount you reward them. Admittedly, it’s not going into their monthly pay, it’s going into their pension – but it’s still a reward, and it’s vital that you engage with your employees and let them know about it.
By choosing a pension scheme that gives you the tools to keep nudging your employees – or in other words, reminding them about their pension – you’re also helping to make it work for your business. A high quality scheme will offer you ready-made campaigns to help you communicate gently and positively, whether it’s to engage employees with saving or to suggest they pay more into their pension. Not all schemes offer this you might have to do it yourself.
You’re helping your employees to potentially achieve their goal of being able to retire when they want – and how they want. But rather than telling people what would happen if they didn’t save, it makes sense to take the soft,‘nudging’ approach and help them achieve their goal by pushing them to take the next step.
It’s one way of making the most of workplace pensions. If your employees haven’t saved enough, they might not be able to retire when they planned to. This means you could have a negative and disengaged workforce, who are not only potentially no longer physically able to do their job, but also preventing you from promoting talent upwards. This is a long-term threat to the competitiveness of your business – and one that can be minimised by choosing a pension scheme that can help you to get ‘nudging’.
Remember, just like stopping smoking, offering help to take small steps towards a goal works a lot better than scare tactics.