The three types of Pension Personality:
and how to help them with Investing

Investments are a crucial part of a DC scheme. But they can be challenging – and even scary – for members. There are significant risks for sponsors and trustees to manage, but there are simple steps you can take to help to minimise these.

The first step is to understand who your members are, because we all know that good decisions are based on knowing exactly who your audience is. In our new report, The Aon Defined Contribution DC Survey, we’ve identified three pension personalities that you need to know.

Pension Personality one:
Disengaged Daniel (Or Debbie)

Disengaged Daniel will say "Do It For Me". He signed up for the pension as part of auto-enrolment because he knew he should have a pension and did not want the hassle of opting-out. But that was it – at that point he had done his thinking about pensions and you weren't going to get any more focus.

So for everything else it is up to you, the trustees or the scheme managers, to do your best for him.

In a typical scheme, disengaged Daniels and Debbies often make up about 90% of members. That’s why it’s so important to review the investment default regularly. Failure to do so means it’s likely that their needs are not going to be met.

How to help:

• One in 10 schemes have NOT reviewed their investment default in the last three years. Make sure you review yours.
• 39% of schemes' default investment strategies are still targeting annuity, despite the rise of drawdown and cash under the Freedom and Choice agenda. Consider whether to move to a mixed annuity/cash/drawdown model.
• Stay up to date with new styles of investment options such as white labelling and target date funds which are growing in popularity.

Pension Personality two:
Aware Alison (or Andrew)

Aware Alison believes pensions are important and she will spend some time thinking about it. She feels Help me do it, but wants the choices to be simple. Offering some managed objective based funds will provide the level of choice she needs.

As Alison approaches retirement she thinks she probably will want to leave her money invested and use income drawdown. Having told you that she wants you to do the more difficult bits

You need to encourage as many members as possible to reach Help me do it before your default starts derisking them towards the wrong retirement target. This should be about 5 years before retirement.

How to help:

• Provide at least 3 managed objective based fund to hopefully result in more younger members becoming Aware Alisons or Andrews instead of becoming overwhelmed and reverting to Do It For Me members
• Help more members to become Aware Alison's or Andrew's as they approach retirement by encouraging them to answer how they might take their retirement benefits before the default investment strategy starts derisking
• Three lifestyle strategies are the ideal amount, covering cash, annuity and income drawdown
• Don't overwhelm them with information - it needs to be fairly easy or they won't say Help me do it.

Pension Personality three:
In Control Chris (or Carol)

In Control Chris will say to you "Give me full control" of my pensions savings. In Control Chris or Carols make up a small yet vocal group of members want to be involved in their investment decisions and are ready and willing to manage their choices on a regular basis. However, it is important to remember that even for these members, too much choice can be bewildering. A careful balancing act is required to give the choice needed, without overwhelming them.

How to help:

• 10-12 white-labelled self-select fund options is the ideal amount and will hopefully result in more people becoming Give me full control members instead of becoming overwhelmed and reverting to Do It For Me members
• Offer access to a different range of classes, review active v passive funds and consider specialist funds (based on ethical and/or religious beliefs)
• GPPs may have too much choice, with 72% offering a huge 20+ lifestyle options. Consider streamlining your choices

No matter what the Pension Personality:

Clear, concise and regular communications is imperative no matter who the audience is, but finding the right method and the right time isn’t easy. Our report shows a mixture of face-to-face, digital and paper-based tactics gives the best results.

Tell us what you think:
Do you identify with the above member types? Will we start to see a shift towards one in particular? Let us know in the comments by clicking here.

Find out more:
If you’d like to find out more about these pension personalities, download the Aon Defined Contribution DC Survey 2015, here. You’ll also discover statistics and advice on how to ensure you’re offering the best member outcomes.

 

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