Page 9 - Savings Psyche
P. 9

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
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