Simon Grover says the industry has to start talking in a language savers understand
Thanks to auto-enrolment, 25 million UK workers are now saving into a pension. But if, in years to come, large numbers of employees start retiring with minuscule pension pots they were expecting to live on, we’ll have a riot on our hands. To avert that, Aviva has said the minimum contribution should jump to 12.5%. In the meantime, we need people to choose to increase their contributions significantly. So how do we do it?
Stand in the member’s shoes
Other than making schemes more generous, the usual answer is ‘financial education’. But this shouldn’t mean teaching people to speak Pensionese. No one’s going to be excited by a 3% gross yield – or anything else to do with the process of money going in. It’s the money coming out people are interested in. So when we talk about pensions, let’s make sure we talk about what people might want when they retire, then show how they can multiply their chances of getting that by putting a few more pounds away now.
When Whitbread asked us at Quietroom to warm members up ahead of auto enrolment, we focused everything on the member’s perspective in this way. The results were startling. Before they even enrolled their first member, voluntary sign-ups to the scheme increased by 17 times. And existing members upped their contributions.
Use the member’s vocabulary
As well as reflecting the member’s perspective, we must reflect their language. That’s because the more we show that we live in the member’s world, the more likely they are to trust us with their money. Reflecting their language means more than just avoiding jargon. It’s about replacing some of the basics of our vocabulary.
Five pension basics we need to change
Let’s start with a big one: contributions. ‘To contribute’ means ‘to give’. You ‘contribute’ to someone’s leaving present, or to charity. You don’t expect to get back anything more than a warm glow. But you put money into a pension because of what you hope to get out of it. So why do we describe that act with a word that means the exact opposite? When people plan for a holiday or a rainy day, they talk about ‘saving’ or ‘putting away’ or ‘building up’ money. So if we want people to take an interest, we should use that kind of language too.
Then there’s tax relief. It’s a difficult idea to explain meaningfully. Some have tried reframing it as ‘saving tax’ or ‘getting your tax back’. But more encouraging is the recent talk of ‘a top-up from the government’. That’s a lovely, vivid idea. It makes me think of Philip Hammond behind the bar of the Queen Vic. So let’s all pledge right now to start using it.
There are plenty more. Auto-escalation is a great idea for increasing contributions. But the phrase itself sounds like killer robots in a car factory. Let’s borrow the US version, ‘Save More Tomorrow’. That sounds friendly, achievable, and something I’d like to have a conversation about.
Salary sacrifice? Again, a good idea, but when is ‘sacrifice’ ever a positive thing? ‘Salary exchange’ and ‘salary swap’ are alternatives. Let’s use them.
The daddy of all pension platitudes is Additional Voluntary Contributions. Each of its three words is saying ‘don’t bother’. You already know I don’t care for ‘Contributions’. ‘Voluntary’ sounds like volunteering, which, like contributing, is something you do for no reward. And ‘additional’ sounds like yet another thing you want from me. Enlightened pensions people have started saying things like ‘income booster’ instead. Good.
If we use members’ language and perspective, members will be more likely to understand why putting in more is a good idea, and then do it. You can start improving what you say in your very next conversation. And it can’t be beyond us as an industry to cooperate in spreading the good word about good words.
Simon Grover is a senior writer at Quietroom