Nudge or engage? Matthew Blakstad, NEST Insight - AIOS
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Nudge or engage? Matthew Blakstad, NEST Insight
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2
What is NEST Insight?
• An in-house research unit set up by NEST to help
address the challenges facing NEST members and
the new generation of defined contribution savers
• Working in partnership with global academics,
policy makers and industry
• Funding from grants and sponsorship
3
DC pensions: myth and reality
4
Human biases
Rewards Rewards
today tomorrow
Unhealthy Good health
lifestyle
Spending Higher
more money future income
5
Educate or nudge?
The ‘old’ way – The ‘new’ way –
informed choice behavioural finance
The challenge The challenge
Low financial literacy Behavioural biases
Asymmetries of information
The solution The solution
Education and information Nudges use these
create active consumers biases for the ‘good’
6
Auto enrolment in the UK
After
Beforeauto
autoenrolment
enrolment
Employee:
Employee: Employer:
Employer: NEST:
Market:
Do nothing
=Do nothing
don’t save Chooses whether
Must Doesn’t support
Designed for
= save to contribute
contribute lower earners
everyone
Saving
Saving is is
for
the
the norm
minority
7
The story so far
Over NEST has over and over
9m 6.4m £2.6bn
people enrolled members AUM
8% 77%
opt-out rate think it’s a good idea
8
Inertia
13%Scale 824,500
employers
445,100
employers
117,900
employers
2015/16 2016/17 2017/18
Automatic enrolment - Commentary and analysis: April 2015 – March 2016
10The challenge ahead Barriers and opportunities for engagement
What is engagement?
Positive attitudes Make a plan Register online
Contribute more Sense of security
Check account balance
Switch investments Be aware
12Barriers
16% 47% 15%
of auto-enrolled are afraid of feel they know
feel more making a mistake enough
comfortable
NEST Consumer Tracker 2016
13Normalisation
Is automatic enrolment a good idea? Will you stay enrolled next time?
NEST Consumer Tracker 2013-2014 (former opters-out)
14Language
15Relevance
1617
Choices
Strong defaults
Single year target date funds
Limited options
NEST Sharia NEST Higher Risk NEST Ethical NEST Lower NEST Pre-
Fund Fund Fund Growth Fund retirement Fund
17Our golden rules
1 Keep it real 7 Take people as you find them
2 Rights not responsibility 8 Be constructive
3 Out with the old
4 One for all
5 Tell it like it is
6 Give people control
(even if they don’t use it)
nestpensions.org.uk
18Emotions
I want peace of
I hit 50 years old and
mind that I
started to panic that I
won't have to
wouldn't have enough
worry in the I started to panic
I'm behind, aren't I? money in retirement.
future. slightly about my lack of
Should have started pension provision so
ages ago. Idiot. decided to pay regular
extras, as the amount
taken from my wages is
minute.
19Events
20Education
21Thank you. nestinsight.org.uk @NESTinsight info@nestinsight.org.uk
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