Journalist Giovanna Guzzetti attended the Mopact International Workshop hosted by CeRP and wrote her reactions
“In a time of plenty of questions about future welfare systems and the future of welfare in developed countries that face the burden of debt (i.e. Italy, and not only), economic and social constraints, being thoroughly informed about individuals’ pension perspectives is a must. And a goal for experts designing new welfare schemes where pensions still are a major player.
At Collegio Carlo Alberto it has been discussed on “Financial literacy and pension-related communication for better retirement and long term financial decision” in a workshop that took place on September 8-9, 2016. An event part of the EU-funded Mopact (Mobilising the Potential of Active Ageing in Europe) Project which started in November 2011, right the day before the Italian Government led by Senatore Mario Monti vowed, as the workshop organizer Elsa Fornero (member of that Cabinet as Labour and Welfare Minister) pointed out. Since then Italy’s pension law radically changed and a totally new perspective about pensions subsidized by private funds arose.
What could hit a communication professional during, and after, this workshop? Two main factors:
– Financial Literacy, essential for any kind of financial decision;
– The crucial role of communication in making people conscious about their pensions (actual and expected).
Without entering in too technical data and details that can affect the effectiveness of messages conveyed to workers on individual pension plans, it can be suggested to focus on 1) Heterogeneity in pension choices and 2) Communication, information and retirement decision.
To make individual choices come into actions, consistent and effective communication is needed. Thus people can find the right (or most appropriate) answers to their own questions on pension plans.
As far as individual choices are concerened, it is significant to go through the process that leads people to choose. They do it by looking for and collecting info on purpose or just because they are overwhelmed by messages, commercials, proposals of pension providers?
A Paper (*) on “Segmentation of Pension Plan Participants: identifying dimension of heterogeneity” helps to answer the question, thanks to the Retirement Belief Model. It states that, beyond demographic and psychographic dimensions, beliefs and emotions (such as trust, propensity to plan, risk aversion, retirement anxiety) do determine the information search behavior of individuals.
Such analysis, at the very end, leads to the conclusion that “Different participants / individuals require different communication approaches”. What’s new in these words? It looks like obvious to differentiate, better target, communication messages. However, Italy’s recent welfare and labour history shows it does not always happen…
Another interesting Paper (**) on “Individual heterogeneity and pension choices: how to communicate an effective message?” tells the story of Italian workers’ severance pay (TFR).
Since 2007, thanks to an ad hoc reform, future severance pay contributions can be transferred to a pension fund so as to increase the basic future pension, supposed to be smaller than previous salaries in a life phase where consumption is not expected to decrease.
In such a scenario low salary and younger individuals should have been expected to divert their future TFR to pension funds. But it did not happen, despite an alleged clear top-down message (from Government authorities). Result: the decision to transfer severance pay into a pension fund was taken by more educated, older, with a high(er) household income. The right opposite of the reform’s purpose.
In the paper this process has been analyzed through the lens of ELM – Elaboration Likelihood Model, according to which, after receiving a communication, people can take a decision following either a central route or a peripheral one, depending on their motivation and ability to think, and eventually change or retain their initial attitude. The individuals’ behavior suggests that the reform information campaign was not very effective: it missed its target.
Common denominator of all the papers presented during the workshop has been the key role of Financial Literacy, whose lack affects, in a gender breakdown, mainly older women, the most vulnerable group, also because they start to get interested and search for info on future retirement later than men (after their 40s, according to Paper *).
Effective communication is a key issue not only for promoting pension funds, anyway.
Even in central laws on retirement (and welfare measures and disciplines) it is strongly recommended that all individuals can easily understand what is really going on and what they can expect. No more labyrinths of words and quotes, please, to achieve the desired effect!”
Giovanna Guzzetti
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Paper * – Segmentation of Pension Plan Participants: identifying dimension of heterogeneity.
by Wiebke Eberhardt (Maastricht University) with E. Brueggen; C. Hoet; T. Post.
Paper ** – Individual heterogeneity and pension choices: how to communicate an effective message? By Costanza Torricelli (University of Modena and Reggio Emilia) with G. Gallo; A. van Soest.