Make a simple receipt

As an industry, we are masters at communicating complex issues in a complex way. But does this help our participants understand how their personal pension pot is developing? Not at all!

By: Berry van Sonsbeek, Product Marktmanager Zwitserleven

What can we learn from other sectors?

Let's look at how banks communicate via apps and the internet about the development of an investment account balance. Why is that relevant? Banks are very experienced with communicating about returns on investments. They do so in a way that investors get all the information that matters to them. And it’s also interesting because participants who invest themselves are already used to this kind of communication. Through the apps, there is layering. The more information investors want, the deeper they can search.

In your app or via the internet, you can very quickly and easily see how the value of the pot is evolving. Over the year from 1 January, or from the time when a person starts investing. Sometimes you can even see it by the day. However, I don’t think this last point is relevant for a pension pot. An investment in a pension is for the long term. And you yourself (usually) have no influence on how investments are made. Let alone being able to make daily transactions yourself. Information about what happens on a single day is therefore of little value.

As much information as you want

If you need more detailed information, a bank will provide a comprehensive asset report. This gives exact details of your investments, the transactions that have been executed, the costs that have been charged (and what these costs were for), the value development of the underlying investments, any dividends or interest and coupons that have been added, and new funds paid in to be invested. This second layer, of course, remains complicated. But with the various communication tools available, it should still be possible to make this understandable.

How can we do this?

Then back to layer 1. Just to start. For example, how could you communicate to an active participant about the development of their pension pot via a sort of receipt on a single A4 sheet, or preferably digitally via an app. As an example, take Mr Adje Hoc who accrues his pension through any pension provider. Such a receipt might look like this.

We assume you will continue working until 68 years of age

Should we make it more complicated or could it be even simpler? Of course, it can be even simpler by showing only the balance of the pension pot. And perhaps the expected capital on the retirement date. Communication experts may look at the balance between simplicity, effectiveness and completeness of the information. I do believe in a system with layers. Where you bring layer 1 very close to the participant and design it with the target group in mind. Dare to experiment in this and see what works and what doesn't (A/B testing). The same goes for layer 2, and maybe even a layer 3.

Communication during the benefit phase remains tricky

For pensioners, it is a good idea to communicate the expected pension income for the following year already during the course of a year. But this will become difficult if the pension pot rises due to lower interest rates, for example, while the pension income is expected to stay the same or decline. I still see some challenges here. During the payment phase, it is difficult to communicate the connection between the level of the payments and the development of the investment pot. Especially if you include interest rate developments, life expectancy and other effects on the stock market. Perhaps it would help pensioners if we continue to talk in terms of annual pension income.