In May 2018, more than 76,500 Ontario public service employees received emails from their employer encouraging them to use the federal government’s retirement income calculator. The emails were the same, but the subject lines were different. Each one targeted a different way of thinking: emphasizing the simplicity of retirement planning, playing up its immediate benefits or prompting the receiver to consider who they’ll spend their retirement with.
The public service employees didn’t know it at the time, but they were the subjects of a randomized controlled trial for the Ontario Securities Commission investor office, conducted by the Behavioural Insights Team, a British firm using behavioural science to improve public policy.
The aim was to see what style of communication would prompt people to engage in their retirement planning. According to a report from the OSC investor office, the trial found encouraging people to think about who they’ll spend retirement with led to the best engagement rates, and noted this demonstrated the powerful effect behavioural science insights can have on individual behaviour.
Behavioural science in the workplace
The task of behavioural scientists is to analyze and try to modify human behaviour. For plan sponsors, hiring a behavioural scientist can help them better understand their members and the entrenched biases that inform how members make important financial decisions, such as how much to contribute to a pension plan or whether to enroll at all.
“We now have very good evidence that people don’t necessarily act with rational approaches, they don’t act with information and don’t necessarily act in a way that incentives would say they should,” says Kelly Peters, a behavioural scientist and the chief executive officer and co-founder at BEworks Inc.
A behavioural scientist can illuminate the barriers employees face in contributing to a retirement savings plan. Those barriers, as laid out by the OSC investor office report, include difficulty getting started, feeling that it’s an easy task to put off and becoming overwhelmed by the process.
They can also help plan sponsors solve problems such as increasing plan enrolment and encouraging members to boost their contribution amounts, says Peters, noting she’s currently working on two projects with a large North American group benefits company. “We’re [testing] some pretty cool concepts, and the hypotheses are born from behavioural science insights.”
One of the hypotheses, notes Peters, is helping plan members get over their present bias — people’s tendency to favour immediate payoffs over actions that may benefit them in the future — by asking them questions about the future they anticipate for themselves.
Dimitri Poliak, a group retirement and investment consultant at Accompass Inc., says a behavioural scientist can also help plan sponsors, and even record-keepers, communicate in a way that members understand.
“You hear insurance companies talking about high rates of individuals not selecting their own investments and defaulting, or high rates of individuals not making an informed decision about how much money they should be putting away,” he says. “One of the reasons is the language the industry propagates is quite terrible, and the questions they ask are wrong. . . . That’s really where the behavioural science aspect comes in.”
Accompass, as well as a number of its clients, has started following behavioural science research, says Poliak. “A greater majority [of employers] are trying to educate themselves in these concepts and leverage what they can.”
However, he notes he isn’t aware of any plan sponsors that have hired an in-house behavioural scientist.
Choosing to do so comes down to employers determining how involved they want to be in their employees’ affairs, says Peters. “Employers need to make a decision about whether they want to be paternalistic or not. It involves going beyond just thinking about the most transactional aspects of being an employer . . . [and considering] what role the employer is taking in ensuring an employee’s well-being.”
Kelsey Rolfe is an associate editor at Benefits Canada.