Research conducted around wake-up packs show they still miss the mark
As part of its Retirement Outcomes Review published earlier this month, the FCA looked into ways it could encourage those approaching retirement to engage with both the free government guidance available and with their pension provider.
The regulator’s Occasional Paper 38 reports on the research conducted with regards to the use of wake-up packs.
As with most things pension-related, those who are engaged, either directly or through an adviser, will have a better understanding of the options and a better outcome in retirement.
Wake-up packs are crucial to getting people to think about what they really want and whether they need help.
Providers have been signposting guidance for some time but the research has reviewed these signposts and how they work.
The research included two field trials with two pension providers to test whether variations to the wake-up packs would have any impact on the following:
- Consumer awareness and use of Pension Wise investment objectives;
- Their engagement with their pension provider; and
- Whether they switched provider to access their pension savings.
The two trials had different purposes. The first was to see if a single wake-up pack could be changed to improve the uptake of Pension Wise. The second was to see if follow-up letters would help the uptake. Both trials had control groups which just received the normal packs.
The first trial consisted of two different changes. The first was to simply add a signpost to the front of the wake-up pack, while the second included a single page insert containing information on Pension Wise, space to record details of their Pension Wise appointment and a declaration as to whether they want to use the free guidance.
This trial did not yield a major rise in the uptake of the use of Pension Wise but it did appear to increase awareness of its existence, which is still a positive result.
The second trial, which looked at the benefits of follow-up letters, had three parts to it. Firstly, a simple reminder; secondly, a reminder but with the prompt to record the appointment; and thirdly, a version that included both as well as a clear indication there was already an appointment available.
Even on a repeat basis, the simple reminders did not show a marked increase in contact with Pension Wise. But highlighting the availability of an appointment has had a positive and statistically significant effect on people calling Pension Wise, increasing it by 4 per cent.
These findings really go to show how people need to be led to get help. Even making an appointment can be too much hassle for some but when one is made for them they will keep it.
Is it all worth it?
But the question of whether this is all worth it is one I need answering.
Generic information provided by Pension Wise is only any good if the client understands it and acts on it. The wake-up pack trials indicate how rife apathy is. No matter how useful, information is worthless if nothing is done with it.
We all know this is one of the areas advisers really add value. Not only do they give personal detailed recommendations but, with the client’s consent, they will ensure they become reality.
This is not something Pension Wise could do even with more resources because of the generic nature of guidance.
I wonder if wake-up packs would have more impact if they came with a voucher for advice. I know this concept is one that has been dismissed before but if we really want better outcomes for those retiring with all the pension freedom options, perhaps it is time to reconsider.
I am not convinced it would cost the taxpayer any more than Pension Wise does, especially with all the advertising it has (which appears to have had little or no impact).
But it could quite easily mean those who would end up falling back on the state will not need to. That makes it worth it in the long run.
Claire Trott is head of pensions strategy at Technical Connection