Keep things simple when communicating costs and charges

Members are perplexed enough by the mystery of pensions, as jargon and acronyms hide true meaning and make understanding unachievable for most.

When there is a legislative change, it is all too easy to fall into the trap of letting the legal review drive the member communications

Recently I spent time with members who were making decisions following scheme changes and their questions started, almost universally, with “Can you tell me what the difference is between defined benefit and defined contribution?” They knew it was an important part of their decision, they just didn’t know why.

When you know pensions it is difficult to get into the headspace of a member who cannot tell the difference between DB and DC.

So, while we may think it is important members know about transaction costs, we should be aware that we are talking to people who may not have even considered that there is a cost to making or changing an investment choice. It is not an exercise in communicating the new FCA rules that we need to start with: we need to go back to basics.

Know your audience

You, no doubt, understand complex financial information, but your members are probably starting from a completely different position. To know them, start by asking them.

Engage them through feedback, get to know what works for them in focus groups or ‘pensions teach-ins’ and you will probably find, as I did, that as you increase their understanding of one subject, you concurrently increase their overall engagement with their pension.

Getting to know your members will help you to communicate transaction costs, but also to understand their financial concerns and improve their understanding of future savings.

Think outside the box 

We know a picture paints a thousand words, but why, in the pensions industry, do we seem to prefer to write a thousand words? Using a picture, a diagram or an infographic to communicate transaction costs at least creates the chance of helping people understand, rather than just communicating information.

And don’t stop at the printed page. A minute of video is worth 1.8m words, according to Forrester Research. However much you may want to challenge the statistic, you have to admit that a simple animation explaining how transaction costs work would help a member understand the impact.

In today’s mobile-enabled workplace, members expect to receive information relevant to them, via the channel they use most – their mobile phone.

Using gamification and interactive modelling tools to boost their interest and to allow them to explore the effect of increasing and decreasing the transaction costs of their investments will soon drive the point home. Using digital technology also enables you to make detailed measurements of the effectiveness of your communications.

Keep it simple

This seems an obvious point, but just like common sense it is all too uncommon. Communication must be accessible to your audience. When there is a legislative change, it is all too easy to fall into the trap of letting the legal review drive the member communications.

The Pension and Lifetime Savings Association’s 2017 Stewardship Report found UK companies tend to have their communications “overly reviewed/sanitised” by legal departments. Similarly, The Pensions Advisory Service saidin a 2013 Work and Pensions Select Committee that poor communication was often the cause of complaints about pension schemes.

Clearly, certain legal requirements need to be met, not least the new rules around transaction costs. However, there is no requirement for cost communications to be written in legalese. Good communication in straightforward language will do the job.

So, let us make sure we communicate cost information to members well. After all, the most important outcome of a job well done is increased understanding with reduced confusion and fewer enquiries.

Karen Partridge is head of client services, UK and Australia, at communications specialist AHC