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Decision trees are taking root

FSA associate Rob Warren says the regulator&#39s research on decision trees shows consumer concern over how the concept fits into the sales process but at the same timea positive feeling that the trees can help people make the right choice

There has been much debate since the Government put forward its proposal for a decision-tree approach to stakeholder pensions.

The recent publication of the FSA&#39s discussion paper on the regulation of stakeholder pension business, which included the latest versions of the decision trees, has further stimulated debate.

The feedback we have received so far shows that there is concern over the use of decision trees and how they will fit into the sales process.

However, many firms and consumer groups have indicated to us that they see no reason why the trees should not work as planned so long as the necessary consumer safeguards are in place.

This positive view was repeated by many of the delegates at a recent FSA seminar on decision trees.

As the regulator responsible for the conduct of stakeholder business, the FSA has led the work to assess and develop the decision-tree format.

Our challenge has been to develop decision trees which consumers could and would use and which helps them make a good choice in the light of their own circumstances.

We have always considered this includes pointing consumers towards fur-ther help or information if needed. It was never going to be an easy task and from the outset our work was very much research-led.

Over the last year, we have conducted three consumer research studies to support the development of the trees.

We have not only found out what helps or hinders consumer use and understanding, for example, in terms of layout, the use of colour, etc, but we also measured the trees&#39 effectiveness in helping consumers make a good choice.

The results have been very encouraging and have been summarised in a new report, Stakeholder Pensions Decision Trees, which is available from the FSA website (

Some key findings from the most recent research study, conducted in April and consisting of more than 700 interviews with consumers, are:

Four out of five consumers achieved an outcome using the decision trees. This is a good result and most had also been able to complete the tree without any help and within 30 minutes.

The remaining one-fifth did not achieve an outcome because they did not complete the tree. This is to be expected when researching what can be a low-interest subject such as pensions. l The fact that the research was conducted before the launch of stakeholder and the associated publicity campaigns may also have affected the propensity of some people to devote sufficient time to complete the trees. However, it should also be recognised that some consumers, particularly those within the stakeholder target group, will simply have no interest in pensions no matter in what format information is provided.

Of those that achieved an outcome, 83 per cent were judged to have obtained an outcome consistent with information about the personal circumstan-ces they provided at the interview.

Those not currently employed (100 per cent) and those self-employed (92 per cent) achieved a higher proportion of consistent outcomes than those who are employed (78 per cent).

A major cause of confusion for the employed is their eligibility for company schemes and, in practice, employers are likely to provide this information, which should considerably improve the position for employed people.

Respondents were very positive about the clarity and layout of the decision trees and three-quarters agreed they had been designed for people like them.

More than 90 per cent of respondents disagreed with the statement that decision trees were too complicated.

The trees are not yet final but the research shows we have very largely succeeded in our aims and it is worth emphasising that so far our research has taken place in a vacuum – stakeholder pensions have not yet been launched and consumers know little, if anything, about the scheme.

In practice, the decision trees will be used in a climate of much greater knowledge both about stakeholder pensions and individuals&#39 eligibility for occupational schemes. This should improve still further the effectiveness of the trees.


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