PPI engagement research: Some people will always struggle to engage with their pensions
More engagement will not lead everyone to make better decisions about their retirement, the Pensions Policy Institute (PPI) has warned.
The PPI examined the current state of pension engagement in a briefing note which was published today.
Although many in the pensions industry share the Department for Work and Pensions’ (DWP) hypothesis that ‘better engagement will lead to better decision making and outcomes for members,’ the PPI argued that this is not always the case.
It added that all defined contribution (DC) savers are required to make complex decisions at and during retirement on how to access their savings to achieve an adequate retirement income, and not everyone will be able to do so.
The briefing note read: “All DC savers will be required to make complex decisions at, and during, retirement about how to access their savings and achieve an adequate and sustainable retirement income. Engagement strategies are increasingly focused on financial education, helping members to build a greater understanding of the options available to them and the risks associated with any decisions they make. However, some people will find it especially challenging to make these decisions, and greater engagement in isolation will not solve this problem. ”
A range of factors can impact how people benefit from greater engagement, including demographic characteristics, such as age, gender and ethnic background as well as financial capability, the note added.
Although savers can be supported to grow their understanding, there may be limits to what can be feasibly expected.
The independent briefing note is sponsored by USS and is the first output in the PPI’s Engagement research series. The series aims to break down what we mean by engagement and for whom engagement is likely to be beneficial, in order to identify what effective engagement strategies might look like for groups with different characteristics.
This will be followed by a full report, published in January 2024, that explores the possibilities for more effective engagement strategies and alternative solutions for groups that are unlikely to benefit from engagement.
