Money matters

Increasing cognitive ease to increase engagement

Sometimes, it’s not the frequency of information, but the sheer amount of it that can create a barrier to action. LV= and The Behavioural Insights Team (BIT) recently tested an approach which focused on getting people’s attention by including a simple one-page, ‘go-to’ summary inside a large pack of information.

In the UK, those approaching retirement are no longer required to purchase an annuity, but instead can take out a cash lump sum. These are complex choices and experts recommend that people seek financial guidance before making any decision.
Therefore, people in the UK can access free and impartial guidance via the UK’s Pension Wise service. Those approaching retirement age are notified of the Pension Wise service through a signposting letter included in the standard wake-up information pack. However, these ‘wake-up’ packs often contain over 100 pages of dense, complex information, leading most retirees to feel overwhelmed and switch off rather than ‘wake up’.
To address this problem, the BIT consolidated the vital information in LV=’s pack into a single A4 sheet (see image), reducing the total amount of information customers have to digest, and making the most important information more salient, including making the next steps to take clear.
The initiative had a significant impact, lifting the number of visits to the Pension Wise website from around 1% to almost 11%, and also increasing the proportion of customer calls to the service, from 5% to over 8%. Whilst response rates ideally need to be much higher than this, it’s a promising start.

Change the frame to change a mindset

Whilst it’s tough enough managing your money as an employee, the self-employed have an even harder deal. Being self-employed can often make managing money much more complex. Income can be unpredictable, careful tax planning is required, and retirement savings and health insurance need to be organised and planned for. Many do not save enough money for either. In the US, 10% of US workers are self-employed and in the UK the figure is 15%.
To help solve this problem, Dan Ariely’s Common Cents Lab at Duke University partnered with Payable to encourage more self-employed people to open a retirement savings account. Payable helps tens of thousands of self-employed people get paid faster and more efficiently by making invoicing and work-tracking simple.
They used a simple A/B email to test if displaying someone’s income in annual terms, instead of “per job,” would increase their likelihood of signing up for a retirement account. This reframed people’s income to encourage a long-term mindset.
Reframing income into an annual form increased the number of people who clicked through to start saving for retirement with a third-party by 14.5%. Encouragingly, most of the 1099 people signing up indicated that they wanted to save 12% to 20% of their income.