A three-year behavioural science programme from Standard Life suggests friction, uncertainty and complexity can prevent customers from fully understanding pension decisions, particularly when they are experiencing vulnerable circumstances.
Customer understanding may be more affected by friction and uncertainty than by a lack of information, according to a new report from Standard Life.
The provider’s Understanding Under Pressure report brings together three years of behavioural science research, customer testing and customer journey analysis, examining how people engage with complex financial decisions and what can affect their ability to understand and act on information.
The findings suggest these challenges can be particularly significant for customers experiencing vulnerable circumstances, including bereavement, poor health, financial pressure or major life events.
Standard Life says this has particular relevance under Consumer Duty, where good outcomes depend not only on customers receiving information, but also on their ability to use it effectively.
One example cited in the report involved pension withdrawal communications. Participants gave the communication an average clarity score of 4.3 out of 5.
However, when asked what could happen to the portion of their pension that remained invested after a withdrawal, only 40% were able to explain it.
Emma Furlonger, managing director of workplace and retail intermediary at Standard Life, said: “Customers need communications and services that work in the real world, not just in ideal circumstances.
“Whether someone is navigating bereavement, financial pressures or planning for retirement, they need information that helps them make decisions with confidence.
“By reducing avoidable friction and designing journeys around how people actually make decisions, firms can help customers engage more effectively and achieve better outcomes, particularly when customers are experiencing vulnerable circumstances.”
The report also sets out what Standard Life describes as a practical framework designed to help firms assess whether customers can understand and act on information when making pension and retirement decisions.
Developed from three years of testing, the framework is intended to support firms in assessing communications and journeys in the context of Consumer Duty, moving beyond whether information appears clear and focusing instead on whether customers can use it to make informed decisions.
According to Standard Life, four questions consistently shaped customer understanding throughout its research:
- Where do I start?
- Why does it matter?
- What should I notice?
- What do I do next?
The provider says these questions can be used across firms when reviewing communications, customer journeys and decision-making processes.
According to the report, many customer understanding challenges stem from avoidable friction, sometimes referred to as “sludge”, which can increase the effort required to find information, understand choices or complete a task.
Standard Life also highlighted examples where changes to communications and customer journeys led to different outcomes.
In one case study examining the firm’s online bereavement notification process, a redesign aimed at reducing effort and uncertainty resulted in more than 80% of customers uploading a death certificate during their first interaction. Early monitoring also indicated a reduction in follow-up contacts.
A second case study focused on pension withdrawal communications. Following behavioural science reviews, customer testing and a redesign, Standard Life said a live randomised controlled trial found customers using the revised version were 2.5 times more likely to complete the process.
Inbound calls fell from 40% to 24%, while requests for further information reduced from 18% to 5%.
Sophie Kulla, lead behavioural scientist at Standard Life, said: “One of the clearest lessons from the research is that understanding needs to be evidenced, not assumed.
“Across three years of work, customers rarely struggled because information was completely absent. More often, friction, uncertainty and complexity made it harder to identify what mattered and what they needed to do next.
“Customers can feel that a communication is clear while still missing important implications or choices. For firms, particularly in the Consumer Duty era, that means going beyond asking people whether they understand something and testing whether they can use the information to make informed decisions in practice.”
She added: “By bringing the evidence together into four simple questions, we hope to give people across the industry a practical way to apply these principles in their day-to-day work, regardless of their role or the size of their organisation.”
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