TV ad unlikely to aid auto-enrolment

This week saw the beginning of auto-enrolment, the “biggest change in pensions for over 100 years”, according to the Government, and a move that ministers hope will result in up to 11 million more people saving in workplace pensions.

The launch has been supported by a month long advertising campaign by the Government to build support for the scheme. It’s followed a fairly simple formula. Get a collection of famous business people like Dragon’s Den star Theo Paphitis to explain what the scheme is, then for these people to say ‘I’m in!’ to demonstrate their support. As far as public information adverts go, it’s pretty standard fare. But how has the public responded?

Unsurprisingly, with some cynicism. A number of organisations, including the Pensions Action Group, question the use of celebrity businessmen like Paphitis, suggesting they were highly unlikely to be taking out a pension designed explicitly for the low paid. Others have simply described the adverts as patronising.

This may seem like employee churlishness, but there are sound behavioural economic theories that help explain why this campaign is likely to be ineffective.

One such theory argues that people are more likely to act on information they receive if it is delivered by someone with similar characteristics to them. Paphitis may be a respected businessman, but he is also a multimillionaire with a lifestyle far-removed from the average low to middle income earner. The target audience for these adverts is unlikely to identify with the jet-setting affluent; they will be more persuaded by people like themselves in normal jobs earning normal wages.

Another aspect of theory, loss aversion, suggests how the Government can improve on these adverts. Loss aversion highlights people’s tendency to strongly prefer avoiding losses to acquiring gains. Thus instead of talking about the savings gap of billions of pounds and similar macro economic factors, the campaign should focus on how people will personally lose out should they opt out of auto-enrolment. The possibility of losing out is a powerful driver of human behaviour and will lead people to remain opted-in.

And there are other decision making theories the Government can focus on to help increase support for auto-enrolment, not least the herding instinct. This refers to the tendency for people to ’follow the crowd’, particularly when distressed or asked to make a difficult decision. Over the coming months, the Government should reinforce the auto-enrolment message by highlighting the large numbers that remain opted-in to the scheme.

A campaign that combines loss aversion highlighting the dangers of losing out and on the herding instinct highlighting that enrolment is the norm is likely to be much more effective than one based simply on celebrity endorsements.

The Government’s determination to get people saving is admirable. But if it wants to crack the savings gap problem, it needs to base its campaign on sound evidenced-based principles. 

John Hood

Consultant

john@linstockcommunications.com