How can one effectively modify behavior in areas such as quitting smoking, adopting a healthier diet, increasing environmental consciousness, or making improved pension decisions? Behavioral design acts as a powerful tool to achieve these objectives by combining insights from psychology and behavioral economics into the design thinking process. Essentially, behavioral design represents a synergistic blend of behavioral science and design thinking, proving to be a successful approach in facilitating (positive) behavior change.
The approach is centered around humans, emphasizing not on how humans should behave, but on understanding their actual behavior. Given that a significant portion of human actions occurs subconsciously and automatically, leading to the formation of deeply ingrained habits, this understanding permeates the design process, product/service development, and digital products/services. The ultimate goal is to influence and modify behavior effectively.
To bring about a change in behavior, action, and habit, it is crucial to concentrate on key challenges, including:
At Pensionbar, our primary objective is to influence behavior in the realm of decisions that significantly affect an individual's life during their retirement years. Leveraging expertise in pensions and a profound comprehension of behavioral paradigms, we design products and services that guides individuals through pension-related choices. Our goal is to empower them to make informed decisions that align with their unique circumstances and contribute to a more secure and fulfilling retirement.
Earlier this year, Financial Services Regulatory Authority of Ontario (FSRA) published a guide for employers titled "Communicating the value of your pension plan". It is aimed for employers and plan administrators to better communicate the full value of pension benefits offered. For the record, FSRA recognizes that the suggested measures in the guide go above minimum requirements of the Pension Benefits Act and describes FSRA’s views without creating new compliance obligations.
In a competitive marketplace, companies push to gain an advantage in attracting and retaining talent. Providing retirement benefits and clear communication can be one way to do this. This concept applies equally to plan administrators, where they can differentiate themselves through member engagement, especially considering the widespread adoption of other well-established administrative features.
In a notably progressive move, FSRA is leading the way in this initiative. Let's delve into some key points from FSRA's guide regarding the effective communication of a pension plan's genuine value.
Value of a plan
A pension plan can constitute a significant component of an employee's overall compensation or total rewards package, potentially representing tens of thousands of dollars annually. Nevertheless, pension plans are not as comprehensively understood as, for instance, health benefits.
For this reason, benefits are not fully utilized and money is left on the table by:
Key communication elements
Some of the recommendations for better communication include:
Last, but not least, digital communications plays a key role in this endeavor. Plan sponsors and administrators start out with transitioning from paper-based communications to digital channels, such as websites, email, social media platforms as well as internal communications channels at the workplace. Social media can encourage users to share ideas and thoughts in the form of texts, blogs, videos and infographics. Digital channels are cost-effective communication tools with the potential to reach large audiences given the majority of the workforce have electronic hand-held devices like smartphones or tablets.
We support this comprehensive guide and the tools it highlights for effectively communicating the full value of employer-provided pension benefits. One valuable addition we'd like to suggest, a specialty of ours at Pensionbar, is the integration of interactive simulators. Our custom simulators are woven into unique user journeys that reflect different life stages. This approach empowers members to learn through interactive experiences and improves financial literacy of employees. The complex plan parameters, governed by rules and regulations, are hidden within the calculation engine. This allows users to generate personalized results in real-time without needing to navigate the plan's intricacies.
Having a regulator that not only supports innovation but also provides valuable and unbiased guidance is a privilege that Ontarians should not take for granted. We certainly don’t!
Retirement planning in Canada has become increasingly challenging, especially for those who do not participate in a defined-benefit pension plan. In a recent Globe & Mail article titled "How hard is it to save enough to retire at age 60?" the author argues that benefits should exceed 50% of an individual's final average pay, calculated based on their earnings over the five years before retiring. For Canadians, achieving such a replacement ratio - the retirement income needed to maintain lifestyle as a percentage of pre-retirement income - can be a daunting task, even when factoring in benefits from the Canada Pension Plan (CPP).
As shown in the article, maximizing RRSP contributions by putting aside 18% of income over a 30-year period, results in slightly over 40% of final average pay. However, public servants enrolled in the Public Service Pension Plan (PSPP) fare much better, achieving replacement ratios above 70% with a savings rate of just 9% over the same 30-year period (excluding the Old Age Security pension).
The reality is that a significant portion of private sector workers do not have access to supplementary employer pensions and must fund their retirement beyond CPP benefits. This situation understandably leads to anxiety and concern when it comes to retirement planning. Financial literacy and effective communication may not be enough to eliminate the problem but they can certainly contribute to alleviating the burden on individuals and the government.
Imagine if individuals had access to digital tools that allowed them to run various retirement scenarios tailored to their unique circumstances. Such interactive tools would take into account variables such as the individual's earnings, savings rate, retirement age, life expectancy, rates of return, and fees. The result? Empowered individuals who can make well-informed decisions to improve their financial situations and work toward a more secure retirement.
At Pensionbar, we're actively working on making this a reality! Building digital tools provides individuals with the means to assess their unique circumstances, plan accordingly and empower them to take charge of their financial future.
In today's digital age, where personalized news feeds and social media dominate, reaching individual customers through digital devices has become crucial for businesses to remain competitive. However, the global pension industry has been slow to embrace innovation and technology for member communication. This industry, vital for the financial security of future retirees, often falls short in engaging members in a modern and meaningful way.
One of the obstacles is the pension industry's oligopolistic structure which poses a barrier to digital transformation. But given the immense importance of retirement savings, simplifying the user experience and communicating plan features in a user-friendly manner are essential.
Other sectors, like retail, have excelled in providing timely, personalized, and targeted communication to their customers using technology. The pension industry has the opportunity to learn from these examples and harness available technology to create outstanding customer experiences that prioritize the financial well-being of their members. The need is real, the vision is clear, and the technology exists; Overcoming inertia is the key to achieving this vision.
By: Don Ezra -
Consider this scenario. You’ve just turned 65. You’ve just retired. Now, of course, you have to replace your paycheck with a new source of income. But that’s OK, because you’ve saved $1,000,000 in your “pension pot.” (Congratulations!) The thing is: you don’t know how much you can draw each year from your pension pot. If you knew how long you were going to live, and what investment return you’d earn, then you can do the calculation (or go to an expert who can). But those are two things you don’t know. Together, they make this “the nastiest, hardest problem in finance,” according to Nobel Prize Winner William Sharpe. So you’re not alone in wondering what to do!
“Imagine a parade of 10,000 people marching past your house every day, each holding a retirement cake and a balloon. That's a lot of calories & balloons and that is only in the United States!”
Projecting forward, today’s 120M+ active participants in retirement plans in North America will be retiring over the next few decades. More than 70% of those will not have guaranteed income for life from private pensions. It is no surprise that decumulation - the problem of drawing down one’s savings in retirement - has recently become a topic of interest to researchers and economists. The enormity of the problem highlights the importance of this issue to both public policy experts as well as the financial services industry.
We live in the age of information overflow. The channels, methods, and frequency at which
we receive information have drastically changed over the last two decades. Mass media such as TV and radio have given way to personalized news feeds and social media interactions.
Our ever-increasing reliance on digital devices has had adverse consequences on our attention span and emotional development. At the same time, this very technology allows people to interact with the world differently.
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