Clarity before complexity: rethinking pension communications

Written By:

Mike Ellicock
Chief Executive
Plain Numbers

In this edition of View from the Outside, Plain Numbers’ Mike Ellicock looks at one reason pension engagement remains stubbornly low and how clearer communication can change it

Pensions schemes face a persistent challenge. Despite significant investment in communications, engagement remains disappointingly low. Annual statements often go unread, benefit explanations are misunderstood, and many people approach crucial retirement decisions with limited understanding of their options.

The usual explanation focuses on people’s apathy or the inherent complexity of pensions. But what if the real barrier lies elsewhere, in a hidden challenge that cuts across all financial services?

Do your members understand their pension numbers?

Recent OECD research reveals a startling reality – around half of adults in England have the numeracy skills we expect of a primary school child (it’s 52% if you want to be exact). This isn’t about intelligence or education level it’s about the ability to interpret numbers and apply them to real-world decisions.

On top of this, around one in five adults experience “maths anxiety”. This involves an emotive reaction to seeing numbers that can prevent people from engaging with any number-heavy communication, even when they have the ability to understand it.

It’s a blunt instrument but ask yourself, could a primary school child understand your pension communications? Your annual benefit statements? Your retirement options explanations?

If the answer is no, you’re potentially failing to communicate effectively with around half your membership base. This can directly impact member engagement, outcomes and complaint levels.

The understanding gap

Our research with the Bank of England and five market leading firms, shows that understanding of financial documents is consistently low – and often far lower than people believe.

Only 13% of people understood a standard water bill
Just 35% grasped common insurance payment options
A mere 19% understood credit agreements

More concerningly, in each case, the majority of participants thought they understood what they were reading. The comprehension testing revealed the uncomfortable truth – people often don’t understand what they’re seeing, even when they think they do.

There’s every reason to believe pension communications face similar challenges. The combination of complex terminology, multiple variables, and long timeframes make them especially vulnerable to misunderstanding.

Missing the foundations

The problem often runs deeper than complex language or cluttered layouts. Many members lack the fundamental understanding of how pensions work – what we might call “the rules of the game” – and this applies just as much for DB as for DC pensions.

They might not understand the relationship between their salary, years of service, and eventual benefits. They could be missing the basic dynamics of how defined benefit schemes protect them from market volatility – and just how valuable this is in these uncertain times.

When communications jump straight into precise calculations and technical details without establishing these foundations, even well-intentioned explanations fail to connect.

Consider the example of a new joiner welcome pack. For many members, this is their very first contact with the LGPS, and so a golden opportunity to explain the basics clearly and build confidence. Yet in practice, the “brief introduction” often runs to 40 pages or more. However well intentioned, such a dense document risks overwhelming new members before they’ve even started, leaving them disengaged rather than reassured.

Pensions can be confusing but clarity is possible

Once you do have a foundational understanding of how pensions work it becomes crystal clear just how important they are to your financial future. The scale of the money involved, the increase in line with inflation and the security they provide in retirement. At that point engagement becomes easier.

But without that foundation, pensions can feel overwhelming. Members are left uncertain about whether they’ll have enough income in retirement, the implications of accessing it at different ages and how to take that income. Add to that the heavy use of numbers, and it is no surprise that many switch off.

The good news is that evidence shows clarity is possible. By designing communications with real comprehension in mind, understanding can be dramatically improved.

The regulatory imperative

Regulators are increasingly explicit about this. The Pensions Regulator highlights trustees’ responsibilities to ensure members can understand and engage with information. Good governance now extends beyond accurate reporting into effective communication.

The FCA’s Consumer Duty signals a wider shift in regulatory thinking. Across financial services, firms are expected to have a reasonable basis for believing their communications are genuinely understood by customers.

For local authority pension schemes, this creates both a challenge and an opportunity: the challenge of acknowledging current approaches may not be working, and the opportunity to transform member relationships through clarity.

Evidence-based solutions exist

When the Plain Numbers Method was applied to financial documents, comprehension levels consistently increased.

Water bills: comprehension rose from 13% to 48%
Balance transfers: 19% to 40%
Insurance options: 35% to 61%

By focusing on the clear presentation of numbers, establishing context before diving into details, and testing actual comprehension rather than assuming understanding, schemes can dramatically improve member engagement.

Three principles for better communication

So, what does better communication look like? The Plain Numbers Method is built around three key principles.

Numbers themselves
Research shows a hierarchy in how people process numbers. Fractions with different denominators are the most challenging, followed by decimals, then percentages. Whole numbers are significantly easier. The most effective approach is to do the calculations for members, using their own data – and get rid of all numbers that don’t directly relate to what the member needs to understand.

Numbers in context – the words around the numbers
We all suffer from what Steven Pinker calls “the curse of knowledge” – once we understand something, it is hard to remember what it is like to not know it. In pensions, this manifests in dense jargon and technical terms. Communications must instead speak “human to human” and build context before diving into details.

How we think – applying behavioural insights
Daniel Kahneman’s work on fast and slow thinking shows that people make most decisions quickly and intuitively, not through long rational analysis. This has profound implications. Information needs to be presented so the key messages are absorbed in a glance – and if you do this well then you can draw members in to more careful study of the whole communication.

A challenge and an opportunity

With evidence-based design principles and genuine commitment to testing comprehension rather than assuming it, local authority pension schemes can transform how members engage with their benefits – and we’re here to help you do that.