Page 9 - Savings Psyche

Given such a preference for instant gratification, some a product decision when taking out an ISA, pension or
encouragement can be taken from the fact that 47% of savings account to fit that purpose. As Figure 3 illustrates,
respondents gave retirement as a motivation for saving. around a third of people think that there is too much choice
However, problems arise when people are required to make on offer, and it is limiting their ability to make a decision.

Figure 3. Choice overload

35%

Cash ISAs

10%

34%

Pension/saving for retirement

13%

31%

Regular savings accounts

12%

 Too much choice
 Too little choice

When too much choice is available, a potential solution is
to provide information and, where possible, augment it with
authoritative, detailed and personally relevant advice. The
key to this is recognising that every employee is different, and
structuring communications accordingly.

However, such an approach is expensive and dependent
on savers trusting the source of advice, engaging with the
information and having the confidence to make a decision.
As such, the information/advice approach will not work in a
significant number of cases.

For quite some time, the now disbanded Financial Services
Authority tried to improve levels of engagement and usage by
mandating greater provision of information and by working on
levels of consumer education and capability, but that approach
met with limited success. When the government resorted to
the ‘nudge’ of enrolling individuals into a pension scheme by
default, they gained far more traction. Well-crafted approaches
rooted in behavioural economics often trump more traditional
information- and knowledge-based approaches.

9 The savings psyche of the UK