14 June 2005 - Publication of DWP research report no. 239: effective means of conveying messages about pensions and saving for retirement
Today, the Department for Work and Pensions published research designed to explore effective ways of communicating information about pensions and saving for retirement. As part of the Informed Choice programme, the findings will be used to ensure Government communications on pensions are as clear and effective as possible.
This qualitative research was carried out over three iterative stages. The initial stage of the research explored the information needs of members of the public. During the next two stages, information sheets designed to address people’s retirement planning needs were developed and refined. The research was conducted on behalf of DWP by BMRB Social Research and Alan Hedges.
Main Findings
Some respondents displayed considerable lack of knowledge, apathy and scepticism towards pensions. To address these issues, information sheets were created and tested to address:
- Deciding what you need in retirement: General information
was developed on how to make decisions about what a person may need in
retirement and how much they need to save in order to achieve it. Whilst
these approaches encouraged greater thoughts about retirement, it became
clear that more personalised information is required to combat some respondent’s
difficulties in this area.
- Addressing lack of understanding about pensions: Simple
explanations were provided on how DB and DC pension schemes operate, plus
concepts such as annuities and inflation. Most found these explanations
clear and easy to understand, giving them a better understanding of pensions.
Although for others they reinforced their negative perceptions, such as
the perceived inflexibility of pensions.
- Highlighting the benefits of pensions: such as tax
relief, employer contributions and guaranteed income until death. Reactions
were mixed, although illustrations of the combined effect of these benefits
were particularly effective where respondents had access to a scheme with
employer contributions.
- Emphasising the importance of saving early: Typically
respondents were unaware of the full extent of the impact of starting
a pension from an early age because they did not take into consideration
the impact of compound interest. For this reason they were positively
surprised by how much of a difference starting to save early made to rates
of return. Although important points were made about targeting such messages
to appropriate age groups.
- Considering other methods of saving for retirement: Comparisons in rates of return were drawn between investing in pensions, property and bank accounts. These helped address common misconceptions over pensions performing poorly compared to other forms of saving, and gave helpful points to consider on the uses of different methods of saving. However, an important finding was that such communications should not be seen to ‘promote’ pensions over other investments.
Overall, the materials enhanced respondents’ understanding of the importance of saving for retirement from an early age in order to provide a sufficient income at this stage of life. The profile of pensions was effectively raised by challenging respondents’ negative views and principally their lack of trust.
The report raises some important questions about role of written information in retirement planning and what it can expected to achieve. Respondents displayed a number of barriers to saving in pensions such as; lack of trust, knowledge, and a lack of transparency and perceived low rates of return in pensions. Information can help address these issues. However, people’s uptake of pensions depends on whether they believe they can afford to pay into one, preferences for other investments and other pressing financial priorities. Regardless of how clearly and concisely pensions and their benefits were explained in the research, for some, they would not overcome these barriers.
Information of this kind can play an important part in getting people to conceptualise retirement, deciding what they need, how much to save and encouraging retirement planning. Especially when tailored to the characteristics and circumstances of the individual. In this, the report does provide useful recommendations on what key messages should be conveyed and their style, format and content when doing so.
Notes for editors
- The report is published on 14th June by Corporate Document Services. The authors are Emma Green and Clarissa White. The research was conducted by BMRB Social Research and Alan Hedges. The report is DWP Research Report No. 239. A free summary is available from:
Paul Noakes at the DWP Social Research Branch
Room 4-26a, Adelphi
1-11 John Adam Street
London WC2N 6HT
Tel: 020 7962 8557
The report and summary are available free on the DWP website, www.dwp.gov.uk/asd/