Why customers don’t engage in their pensions

If there is one industry that needs to do more than any other to fix their customer experience, it’s financial services.  Purchasing insurance, opening a bank account, switching mortgage providers or comparing credit cards – financial services as an industry constantly misses the opportunity to establish customer trust and give clarity and transparency in their processes.  Instead, customers are often faced with a plethora of contacts, and communication media, unfamiliar process and lack of certainty in what happens and when. Despite many claims, the industry as a whole continues to score low on a positive customer journey.

It’s an issue I’ve posted on before, but during a recent project, I have started to unpick some of the fundamental issues.  I’ve become familiar with one of financial service’s most complex customer products, and that gets to the core of why customers don’t engage.  This week’s post will focus on pensions, and why customers do so little to engage with something so important.  I could discuss this topic for hours, but in the name of brevity, I’ll focus on 4 core considerations.

Information overload: When we think about joining a work pension scheme, we think about the thud of the information pack landing on our doorstep, that sits unopened, ignored and ultimately forgotten.  It’s full of papers, covered in jargon, gumph, complexity – so we avoid doing anything with it.  There is no drip feeding or gradual introduction to this topic, it’s like someone dropping a big heavy book on your head.  Nothing about the early experience encourages you to embrace what should be an exciting positive thing.  Instead, we procrastinate – “I’ll do it later / next week / over the weekend.”  Let’s face it, if an experience starts this bad, can we really expect customers to engage in what is their future life savings?!

I’m not the expert: Despite working in the industry, I still get confused.  Acronyms, lengthy legal documents, endless terms and conditions and convoluted processes – all designed to make things easy for the company, or to ensure that the company liabilities are covered.  As a normal human, I am not an expert on finance, investments or pensions, and it feels way too complicated for someone like me to become involved.  Even “normal” people working in customer facing roles seem to loose their humanity when talking to customers, assuming that everyone understand the difference between DC and DB, or fully understands how annuities work.  Pensions are very complicated, and providers need to constantly remind themselves that they, not the customers are the experts!

Think about me: – A pension is a funny old think – it’s something that we have from our first working day till the day we die, and yet we don’t understand it!  How crazy is that? And certain stages, such as going from paying in to drawing down on your pension  will only happens once in my life.  There are so many emotions involved in a pension journey, and so few are positive.  Concerned I’m not paying in enough, confused by the choices, fearful of wrong decisions, guessing what the right action to take – it’s very worrying time.  Despite the regulator and some providers trying to improve this, there is still not enough thought put into how the customer is feeling and the impact of these emotion on action (or lack of action.)  Putting yourself in the customer’s shoes, accepting the real emotions and building an experience accordingly is the best way to change behaviours.

Outdated and clunky process:  Let’s say you get a bonus, and you decide to put some into your pension pot – how easy is it to do?  Contact your HR team, request to make the change, contact the pension provider, fill out a form, receive a paper confirmation – seems like a lot of hassle.  As you get nearer retirement, it gets much more complicated, and customer are exposed to the labour-intensive and outdated working of financial services.  For those brave / bold enough to really get into the detail, they could end up dealing with 2 or 3 different businesses in order to progress into retirement and draw down on their pension.  This might have worked in the olden days when people had a job for life, but in the modern world, where we will have on average 10+ pensions by retirement, it looks like a full time job just to manage my pension pots.  It’s so detrimental to the customer experience to expose customers to your internal process, so don’t do it – make it simple and easy for me and hide your inner workings!

Your pension (or super-annuation or 401K) pot is your future savings – your company pays in, and the government gives tax relief, so this should be something really positive.  There is so much work to be done with consumers to get to this stage, but the 4 considerations above would be a great place for the financial service industry to start.

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