Activating Pension Plan Participants: Investment and Assurance Frames
Many pension plan participants are inactive and do not take the time to review their retirement savings situation. Pension providers and policy makers look for ways to further motivate participants to become aware of the importance of pensions, to search for information about their expected pension benefits, and ultimately to take action (e.g. build up additional savings in case of a pension gap). Performing a field experiment with Dutch pension plan participants, Eberhardt, Brüggen, Post and Hoet (2017) analyze how different communication frames can activate participants. They find that communicating with an “assurance frame” doubles click-rates in an email newsletter sent to participants.
1. Traditionally, “loss frames” are often recommended to trigger action. This study indeed finds that a loss frame (“You lose from not informing yourself today…”) is more powerful in triggering behavior (click on a link) than gain frames (“You gain from informing yourself today…”). But, in the pension context, the loss frame is also found to evoke negative emotions among participants. It is thus questionable whether applying such a frame in the pension industry yields desired long-term benefits.
2. Therefore, two new frames (assurance and investment) are developed and tested in the field with more than 7,000 Dutch plan participants. These frames tap into similar psychological mechanisms (e.g. prevention of loss vs. focus on gain) but avoid the use of the word “loss.” The assurance frame (“Ensuring your pension is getting even more important…”) is found to be twice as effective than the investment frame (“Investing in your future is becoming even more important…”) in triggering participants to open a link to an educational movie explaining recent changes affecting pension benefits. The click-through rates (percentage of all recipients receiving the newsletter that clicked on the link to the movie) were 6.7% in the assurance frame vs. 2.8% in the investment frame. At the same time, additional studies showed that the assurance frame does not trigger negative emotions.
Pension providers can use the findings of this study to make their pension communications strategy more effective. Even small textual changes in communication can have a large impact on behavior. Using such framing nudges is especially interesting since even minor changes in messaging significantly alter a participants’ perception and response – an approach that is minimal in cost compared to expensive awareness campaigns.