A study by investment management organisation Invesco into the language of defined contribution (DC) pension schemes has identified four key language principles for communicating with employees about their pensions.
Research for the report, ReDefined contribution schemes, published on 18 October 2018, included interviews with heads of pension schemes, focus groups and a survey of 500 UK employees.
Scott West, head of Invesco Consulting, said: "Having previously carried out the study in the US, we wanted to bring this research to the UK, not least at a time when auto-enrolment is presenting a significant communication challenge for the UK's pension industry."
The research found that members prefer their schemes to talk about pensions using language that is positive, plausible, plain spoken and personal.
The study also highlighted key phrases and vocabulary that UK employees like to hear when it comes to pension communications, such as discussion about "comfort" in later life, as well as language that is off-putting or confusing, with unrealistic phrases like "dream retirement" often being met with scepticism.
According to the report, language focusing on "sacrifice" and fears of "pension poverty" is less motivating than positive language emphasising the benefits to be gained from investing more in their pension. Other phrases to avoid in pension communications include "low cost", which makes employees suspicious, "institutional investment", which they struggle to understand, and "autopilot", which they associate with a loss of oversight and control.
West said: "Pension scheme engagement is crucial to encourage employees to think about their financial futures. However, the exact language that schemes are using is often ignored. Many words and phrases that are being used by schemes are found to be evoking negative emotional responses from members. Pension schemes need to carefully consider their engagement strategies, improving conversations to help their employees understand the importance of their financial futures."
Seven in 10 (70%) of respondents said they would rather hear about an investment that maximises their gains, rather than one that minimises their losses, in their pension communications. When the survey asked what respondents wanted to be referred to, "employee" was the preferred option for almost half (45%), followed by "member" (33%).
Stephen Messenger, UK institutional sales director at Invesco, said: "Our extensive study into the language of [DC] pension schemes reveals many of the words and phrases used within the industry did not connect with their members. Employees want confidence that their investments are right. The language that is used to communicate this is extremely important.
"The UK is a diverse workforce and there is no doubt it is challenging for pension schemes to create messaging that resonates with all [their] members. However, our study proves that in order to get employees engaged with a technical process, it is vitally important to use the right words."
