Deciding what to do with pension savings is one of the most significant financial decisions people have to make, and yet it is also one of the most complicated. Over the last two years, LV= has worked with Government and the Behavioural Insights Team (BIT) to trial a ‘Pension Passport’ with LV= members in place of the current pension wake up pack. The results, published today, suggest a ‘Pension Passport’ would lead to better consumer outcomes than wake up packs. As a result, LV= is committing to overhauling all wake up packs, based on the trial findings, to ensure customers are able to understand their options.
LV= and BIT, through collaboration with Government and industry, designed a one-sided A4 ‘Pension Passport’ that included the essential information a customer needs to access open market retirement product options, and a clear call to action to visit Pension Wise as the next step. In the trial, nearly 1,000 Pension Passports were sent out to LV= customers to see whether consumer behaviour would change as a result. This led to an almost tenfold increase in the likelihood of someone visiting the Pension Wise website, and a 59.7% increase in someone calling the Pension Wise information line.
In addition, a follow up telephone survey with over 100 customers found those who received the Pension Passport were 42% more likely than those who got the standard wake up pack to call around other pension providers as their next step in their retirement journey. They were also 52% more likely to say Pension Wise or guidance would be the next step for them and 50% more likely to say the information they were sent prompted them into thinking about or taking action.
BIT concluded the findings show the Pension Passport would be significantly more effective than existing wake up packs in encouraging people to take impartial guidance. It would also increase the numbers making an active choice about which provider, and which products, to choose at retirement.
LV= is now committing to overhauling its wake up packs and including the Pension Passport for its customers. If the rest of the industry did the same, it would be easier for consumers with multiple pension pots to understand their situation and the options available. Directing people to guidance is also likely to increase the numbers taking professional financial advice as guidance can help people understand whether they would benefit from advice and signpost them to it.
Philip Brown, Head of Policy, at LV= said: “The trial of the Pension Passport has shown that by changing the wake up pack we can increase the numbers taking guidance and therefore help consumers to get better outcomes in retirement. Guidance should be the first port of call for anyone wanting to explore their retirement options and not using a financial adviser, but unfortunately the numbers visiting Pension Wise are still quite low.
“That’s why we’re committing to changing our wake up packs to give consumers only the most important information and a clear prompt to take action. We also look forward to supporting future Government trials in this sector as it’s vital the industry keeps working to find new ways to support consumers get the right support at retirement.”
Elisabeth Costa, Director at the Behavioural Insights Team said: “Making informed decisions about retirement options can have a huge impact on peoples’ future income and quality of life, yet for many consumers, information about retirement options can feel complex and overwhelming. We took a standard 100 page wake up pack and distilled it to one page of simple, salient and personalised information, alongside a checklist of next steps. This simplification led to an almost tenfold increase in the likelihood of consumers visiting the Pension Wise website to seek guidance.
“We are delighted that LV= will be sending the Pension Passport to all of their pension customers. The Pension Passport is a great example of how simple, salient and personalised information can increase consumer engagement. We encourage other providers to follow LV=’s lead and make similar changes to wake up packs. Widespread use of the Pension Passport could have a significant impact on the numbers of consumers seeking pensions guidance and, in turn, contribute to better outcomes for consumers in retirement.”