How technology can help make pensions click
Bringing technology and flexibility together may help guide your employees through emotional barriers around their retirement options.
Having your brain tickled by a Sunday afternoon crossword or fiddling with a Rubik’s Cube, as your mind plays mental gymnastics, is a fine balance between fun and frustration. Solve it and your mind flutters to the next challenge. Give in to the frustration and it may take over your thoughts.
For some, pensions may bring out similar puzzling feelings. Less than half (42%) of people from our recent survey, aged 50-64 years-old, believe they are knowledgeable about financial products such as investments, pensions, and annuities while only 38% are confident when dealing with such products [1]Footnote 1.
This isn’t for lack of trying or interest.
When asked how easy it is to find information about pensions, 62% found it either ‘quite’ or ‘very’ easy with 81% using Google and 75% finding answers on money expert websites.
But, it’s not just about access to information. Within .37 seconds, Google will give you over 500,000,000 results for a search on ‘UK pensions’ with results ranging from pension services to general information. But for many, this is overwhelming.
Pensions are complicated. And so is peoples’ ability to connect with them, especially as retirement could be decades into their future. Whether an employer or an employee, recognising the mental and emotional blocks that keep some distant from their pension, and recognising how technology could help move the barriers, may be a powerful step to shifting mindsets.
Actions around pensions are felt more than thought
“The attitudes participants expressed towards their pensions,” according to a recent study from the Department for Work and Pensions, “were characterised by detachment, complacency and fear [2]Footnote 2.”
For employers, recognising these could guide more effective strategies in building employees’ pension understanding.
- The fear and feeling of it all – sometimes, the biggest challenge for employees is how they feel about their pension. And those feelings may be complex and overwhelming.
Some may feel little ownership of their pension because it doesn’t “feel like their money as it was taken at source, before they saw it in their bank account [1]Footnote 1.” As a result, because it doesn’t feel like their money, they aren’t motivated to think of or look at their pension beyond the occasional check-in. Others, however, may either feel satisfied to know they’re enrolled in a pension and payments are being made or they may find interacting with their pension intimidating; [2]Footnote 2 they may be complacent with their pension ticking on or fearful to meddle. - The accessibility and convenience – time is a scarce resource and balancing work, home, and personal life responsibilities makes prioritisation a daily survival skill. Fumbling to understand pension jargon, which certainly impacts confidence, or decoding what the information means and clearly understanding the next steps to take may be too big a hurdle for some. Some simply don’t have time to explore their pension [2]Footnote 2.
Technology and pension flexibility to help shift pension barriers
Our research shows that employees want to be guided on what to do and, how to do it, and given a better understanding of pensions overall [1]Footnote 1. And while 60% of these employees believe that having a specific saving goal would encourage them to become more engaged with their pension, more than half (53%) think a better understanding of pensions or how they work would get them more involved [1]Footnote 1.
Technology has the potential to break down barriers to accessibility. Technology and flexibility may help change pension habits from watching and accepting to actively participating [1]Footnote 1. From online websites to phone and tablet apps, technology and pension innovations could change the culture around pension behaviour in three ways:
- Making it convenient – rather than shuffling through documents (filed who knows where) or relying on hazy memories, getting information securely and whenever needed is one of the main goals of technology; to remove barriers and bring convenience.
Employees want to know ‘what have I got?’, ‘is it enough?’ and ‘what should I do next?’ And they want this information in a concise, visually engaging, interactive, and efficient format [1]Footnote 1. Having pension information all in one place, accessed at the touch of a screen, could remove some anxiety for people. - Using tools to bring the future to now – it’s hard to think about the future when piecing together daily responsibilities of home, work, and a personal life. It’s even harder, for many, if it means thinking about numbers and abstract projections.
Encouraging employees to know about and use tools, such as Aviva’s Retirement Planner , could help bring the future a bit closer into perspective. This tool helps people think about how they’d like to live their retirement, what they’re contributing at the moment, and what this will mean for their savings. Alongside the Pensions and Lifetime Savings Association’s (PLSA’s) Retirement Living Standards, people can begin to recognise how much is needed in retirement for different standard of living expectations. - Making pensions personal – reminding employees that pensions aren’t always one size fits all, and helping them find the pension option most fitting for their life, may change how they think about their retirement future. In the early stages of their retirement, employees may be more active and want to fix up their house or fly off to more holidays. In the later stages, they may be less active and have fewer expenses, but want the certainty offered by a guaranteed income – one that lasts as long as they do.
A blended option, then, may be a more appropriate fit for some employees. This may look like bringing together the flexibility of income drawdown (in the earlier years) with a guarantee in later life. This could help protect against employees outliving their pension pot and may guide employees’ decisions around investments, inflation protection, the amount of sustainable income to use in the early years, and when to buy a guaranteed income.
For many employees, thinking about pensions and retirement can trigger some complicated emotions. Acknowledging this and signposting the way to the most appropriate technology and product options may help ease the worries and increase confidence.
To learn more about how retirement is changing, check out what’s happening with our guided retirement option.
