New research on communication with people in their 30s, 40s, and early 50s has identified how simple changes to the use of language could help people to engage with pension saving and take action that could make a real difference to their retirement income in later life. How much of an impact can language have?

People in their 40s and 50s today have been caught between caring for their elderly parents, who are living longer and more likely to need long-term care, and their adult children, who are struggling to get on the property ladder. This is known as the ‘sandwich’ generation.

They are also ‘squeezed’ when it comes to pension saving: too young to have benefited from defined benefit pensions and although they are now likely to be saving for retirement through auto-enrolment, this may have only started mid-way through their working lives.

Almost half of the respondents aged 35-54 in the report carried out by master trust Nest, investment firm Invesco and communications consultancy Maslansky said they were unaware of how much income their pension will provide in retirement. This has resulted in what the report refers to as the dilemma of inaction. 

When asked, ‘How likely are you to do one of the following in the next 6 months’, half of respondents said they would check their balance, just over a quarter said they would calculate their savings goals and plans, and only 16% said they would increase their contributions and transfer or combine their pension pots.

The research shows that more needs to be done to help this generation feel more confident about their pension. “Despite the efforts by pension providers to deliver messages and tools designed to encourage retirement planning, many people in this age group are not engaging with their pension savings,” said director of research and innovation at Nest Insight, Jo Phillips. 

The three common barriers that were identified in the research were affordability, feeling overwhelmed, and low confidence. 

Half of respondents said they cannot afford to contribute more to their pension right now and 35% said they have more pressing financial priorities. Two-fifths said pensions is too overwhelming to think about, with Covid-19 still having an impact, as 33% said they were less confident because of the pandemic. Finally, 20% said they feel they are on track when it comes to planning for retirement.

Just over a third of people in their late 30s, 40s and early 50s say they feel a sense of defeat when they think about retirement. This feeling can also come with a sense of regret, especially amongst the 45-55 age group, that they had not started planning earlier.

The research found that many common approaches to pension communication are ineffective because they emphasise the barriers people face, rather than helping to overcome them. 

“Overwhelmingly, we found that communications that meet people where they are, with empathy and reassurance, and make retirement planning feel manageable, can give them the boost they need to engage for the first time,” said Phillips. 

The report suggests that due to the defeatist attitude of this age group, the key messages should aim to boost confidence, address knowledge gaps and make the daunting task feel more manageable. Based on these findings, the report summarises these rules into the ‘four P’s’: positive, plausible, plainspoken, personal. 

Examples of this include emphasising what people already have, such as the state pension, considering their current financial situation in order to move forward and providing realistic next steps. 

Director at Quietroom, Simon Grover, said it is essential for schemes to consider savers’ feelings: “People make decisions based on emotions and then back that decision up with rational-sounding justifications afterwards. That’s especially true of complex decisions.”

He said that too often, the pensions industry thinks it is enough to give people facts and process, and that people will then make rational decisions. “But we know life isn’t like that and that’s not how our brains work,” said Grover. “That’s particularly true when dealing with a scary, complex, intangible subject like pensions.”

Expanding beyond language, Grover saidschemes can improve engagement by showing examples of members making decisions and navigating the process: “The point is to show it’s achievable by ordinary people. If a member sees another member managing it, they will feel more confident that they can manage it too. We can show these example members in simple stories, pictures, videos and other formats, and on various channels from the scheme website to TikTok.”

Although communication alone cannot solve all the barriers to engagement with retirement income planning, after putting this approach of communication to the test, the messaging of the ‘four P’s’ made a significant difference. The research found that those likely to use online tools such as retirement calculators increased from 29% before to just over half with this messaging. In addition, those likely to increase their pension contribution rose from 16% to 39%.

“Whilst we know that the actions people say they will take do not always happen in reality, the level of change in people’s stated intentions after seeing the optimised messages was quite striking,” said Phillips. “These results give us reason to believe that communications using these foundational messages can help drive a positive change in the number of mid-working-life savers planning and preparing for retirement.”