A ‘nudge’ is a form of psychological technique that can influence the way we all behave. A good recent example of this is the introduction of auto-enrolment pensions.
In order to increase the number of UK workers who were saving into a pension scheme, the government made it compulsory for employers to have a pension scheme that their workers were automatically placed in. Employees’ contributions were to be deducted from their pay packets unless they formally requested to be exempted and thus also miss out on the employer’s contribution. This made the decision to save for retirement much easier for workers to make, and as a result pension scheme membership has been steadily nudged up to over ten million people.
A recent report from the BBC shows that technology can play a role in encouraging us all to save. Apps can load up pictures of savings goals, like a car or a first home, to a user’s mobile phone. Then, as you save more towards your goal, the image becomes clearer. If you withdraw money, the picture starts to disappear.
Visual prompts like this are a very effective way of helping people to save more for the future; who knows what’s around the corner?
A pension is a long-term investment. The fund value may fluctuate and can go down. Your eventual income may depend on the size of the fund at retirement, future interest rates and tax legislation.
The value of investments can go down as well as up and you may not get back the full amount you invested. The past is not a guide to future performance and past performance may not necessarily be repeated. Income protection (with no investment link) has no cash in value at any time and will cease at the end of the term. If you stop paying premiums your cover may end.