How to beat present bias in pensions comms

It’s the age-old challenge: how do you get people to care about their old age? Especially when our brains are wired to prioritise our immediate wants and needs over our long-term wellbeing. It’s called present bias.

This quirk of the brain can make it difficult to make rational choices about pensions, particularly if retirement is years away. And this is why pension providers work hard to get us out of our ‘right now matters more than later’mindset – often using behavioural science to help them do it.

Scottish Widows launched their PensionMirror, which uses AI to guess your age and then compares your pension savings to other people of the same age. The Pensions and Lifetime Savings Association cuts through pensions ambiguity by using clear and careful labelling to explain how much people need to save for a minimum, moderate, or comfortable lifestyle in later life.

A public service pensions client recently threw us the ultimate present bias challenge: get people to stop, think, and weigh up what’s right for them in the long term, when there’s the option of a sizeable refund on the table today.

Here’s what we did to tackle present bias

1.      Ease the mental effort needed to make a choice.This pension scheme’s research in 2020 found that 40% of members rated their understanding as poor or very poor. So, part 1 of our communication focused on explaining the basics in clear, simple language, all on one page. Part 2 of the communication focused on options and actions – also on a single page.

Splitting this content in two meant we could use priming to help members understand the significance of their decision before getting distracted by the numbers. We boiled it down to a simple framing: the choice you make today affects the options you’ll have when you retire.

2.      Use the right choice architecture to frame the choice.The natural temptation is to offer choices in chronological order: you can take£10,000 now, or wait and have £10,000 plus more options available to you later.

But, since £10,000 is a lot of money, it’s simply too appealing to expect people to be rational about it. We disrupted temptation by presenting the ‘sensible’ choice as Option 1, and the present biased choice as Option 2.

People are unduly influenced by the first key piece of information they see – it becomes the reference point against which they make future judgements. This is called the anchoring effect, and we used it to set up the sensible message as the influential baseline: ‘take the money later and have more options open to you at retirement’.

‍3.      Use concrete examples to help people visualise the benefits of waiting versus taking the immediate reward. If you’re going to offer people a specific amount of money now, you need to help them weigh it up against a potential amount of money later on.

This helps to kick rational thinking into gear, making it more likely that whichever option these members chose, it’s more likely to be an informed decision, rather than a biased one.

Results are still coming in, but so far, we’re seeing around 70% more members choose to wait and keep their options open.