Don’t try and scare DC savers, language study finds

RetirementAppeals to fear and sacrifice when dealing with pension savers are less likely to work than “positive messaging”, a major study of language used in pension communications has found.

Invesco studied the language of defined contribution (DC) pension schemes in member communications and said positive messaging was better for motivating people to engage with pensions than scarring them.

The ‘ReDefined Contribution Schemes’ study is the most extensive research ever conducted into the language of pensions, Invesco said. It included in-depth interviews with heads of pension schemes, focus groups that captured emotional responses to words and phrases, and a survey of 500 UK employees.

There are certain key phrases and vocabulary that UK employees like to hear when being informed about their pensions, while some other language is “off-putting or confusing”.

The phrase “dream retirement” was met with scepticism by employees, who preferred a more plausible focus on “comfort” in later life.

Researchers found that members prefer their schemes to talk about pensions using language which is “positive, plausible, plain-spoken and personal”.

Seven in 10 (70%) of respondents also wanted to know their pension scheme was “personalised” and tailored to their needs.

“Low cost” is another phrase to be avoided because it makes employees suspicious.

“Institutional investment” should not be used because employees do not understand it, and “autopilot” should be avoided because it might imply loss of oversight and control.

Scott West, head of Invesco consulting, said: ”Pension scheme engagement is crucial to encourage employees to think about their financial futures, however the exact language that schemes are using is often ignored.”

Many words and phrases that used by schemes were found to be evoking negative emotional responses from members. Pension schemes need to improve conversations to help their employees understand the importance of their financial futures, West said.

Other findings showed that schemes should say “maximises your gains” rather than “minimises your losses”; "help you stay on track to a more comfortable and enjoyable retirement" rather than "make sure you don't outlive your money"; and “growth” rather than “compounded growth”. But do call members “employees”; they do not like being called “members”.

Invesco previously made similar findings in the US where over three quarters (77%) of participants preferred the same choice of language – though employees there preferred to be called “participants”.

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