New research published today by Nest Insight challenges the commonly held view that talking to disengaged pension savers about responsible investment and environmental, social and governance (ESG) issues could be a widely effective way to prompt people to engage for the first time.

Whilst findings from research surveys have concluded that the approach could be powerful, to date there has been limited real-world evidence on how people’s stated intentions translate into actual behaviours. The research, supported by Legal & General Investment Management (LGIM), explored whether responsible investment communications can engage pension savers, who have never logged into their pension account, more effectively than standard approaches. Through a behavioural email messaging trial conducted with 35,000 unregistered contributing Nest members, the real-life impact on engagement levels was assessed by measuring open rates, click through rates, and account registrations.

Keep messages simple and focused on the ‘call to action’ to drive first time engagements

The research found that a standard account activation email, with no mention of investment or responsible investing, resulted in higher open and click through rates, and the strongest impact on member registrations, regardless of age, gender, salary or employment industry, when compared with emails talking about responsible investment in different ways.

These findings suggest that care should be taken with communications about responsible investment, depending on the target audience and the engagement objective. For a disengaged audience, a straightforward message, or personalised communication, may be more effective to prompt people to engage with their pension account for the first time.

The opportunity cost of using a less engaging message to prompt account activation could be high

The research findings suggest that the first step in the engagement journey, in which people are encouraged to log into their account for the first time, could be an important door opener to other engagement and action. Among those who registered their account in the month following the trial:

›        88% said they knew how much they contributed to their pension, compared to 74% of those who did not register their account.

›        80% said they knew how much their employer contributes to their pension each pay period, compared to 69% of those who did not register their account.

›        52% said they knew how much they will have saved in their pension(s) by the time they retire, compared to 34% of those who did not register their account.

›        69% said they knew the current size of their pension pot, compared to 40% of those who did not register their account.

›        42% said they knew how their pension pot is invested, compared to 27% of those who did not register their account.

To encourage members to take actions that can have a positive impact on their retirement savings, test and learn trials like this can help schemes to pick the most effective messages for different target groups.

Three instances found where responsible investment messaging has an important role to play

Learnings from this trial show encouraging evidence of three occasions when messages about responsible investment may have a role to play in reaching out to disengaged pension scheme members:

  1. To drive engagement among people who say they care about ESG issues: Among pension savers who say that ESG issues are very important to them, the research findings indicate that a responsible investment message can be more effective.
  2. To help people engage with the concept of investment or build awareness that pension savings are invested. If the objective is to raise awareness that pension savings are invested for long-term growth, a message describing how savings are responsibly invested may be more powerful than talking to pension savers about their money being invested in assets like shares and property to help it grow.
  3. To build trust in pensions and scheme providers: Those who opened an email that included specific examples of how addressing ESG issues in investment strategy can lead to better outcomes for scheme members, were the most likely to give a high score when asked how much trust they had in their pension provider. People who opened this email also displayed higher confidence in their knowledge about their pension than the other groups.

Jo Phillips, Director of Research and Innovation at Nest Insight, comments:

“Our research findings suggest that there could be quite a wide gap between the pension industry’s interest in talking about ESG and the current appetite of some scheme members for hearing about it. However, it’s important to remember that the emails tested in this trial were designed to prompt the very first engagement among an unengaged group of pension savers. It’s quite possible that we’d see different results among savers who are further along their retirement saving engagement journey.

“It’s also clearly true that some people are highly motivated by ESG issues, and awareness of the relevance of these to pension saving is growing. If communications can be tailored and targeted to those who care about ESG issues, then the research indicates that these messages could indeed be effective. But personalisation is key. Information about responsible investment should be shared with those who want to find out more, but in a way that isn’t daunting or off-putting for others.

“There are many outstanding questions around what role responsible investment could play as a motivator of pensions engagement. We need to better understand how the patterns we saw in this trial might vary in different settings, such as with different target audiences, in the context of different schemes and at different touchpoints. We’re keen to explore this further as our research programme develops.”

Stuart Murphy, Co-Head of DC at Legal & General Investment Management, said:

“As an industry we have a critical responsibility to find ways to educate, support and empower our members on the benefits and impact of their pensions savings on society. This research shows that we must adapt the way we talk to members, using straightforward language, and focusing on subjects that matter to them.

“While terms like ESG and responsible investment may not always spark initial interest with members, we know they want to feel consulted about how their retirement funds will shape corporate activity, society at large and how it can make a real difference to the planet.

“At a time when DC pensions need more voluntary contributions, more understanding and in general more interest from members – it is clear that we, as an industry, need to do better in tailoring the way we communicate to ensure that we encourage them to fully engage with their pensions.”