In order to drive more participant engagement with their retirement plans and more overall participation, behavioral finance experts at Voya Financial say enhancing the design of an enrollment website and presenting higher default contribution rates up front are digital strategies that plan sponsors and recordkeepers should consider implementing.  

Revamping an enrollment website does not necessarily require adding new bells and whistles, but simply reframing language and reordering default rate options could prompt participants to save more than they ordinarily would, according to Tom Armstrong, Voya’s head of customer analysis and insight, as well as the head of the Voya Behavioral Finance Institute for Innovation. 

Armstrong says reframing contribution rate wording to “pennies per dollar” is something that makes more sense to people, as opposed to suggesting they contribute a certain percentage of their pay. The pennies-per-dollar strategy is particularly effective for low-to-moderate-income workers, Armstrong says. 

In a study Voya conducted in 2021, for example, a randomized group of 2,225 participants across 86 employers were surveyed, with participants assigned either a pennies or a percent treatment for making retirement savings elections. For those who submitted a savings rate, the “pennies” wording had a positive impact on savings rates and also reduced gaps between participants with disparate incomes.  

The effects were largest for those in the lowest salary tercile (annual income less than $46,000), as they elevated their savings rates to approximately 8.03% from a control savings rate of 6.88%.  

“We found that those who were earning less money [and] had lower financial literacy or financial wellness tended to then save more, because we were engaging them in terms that they were more familiar with,” Armstrong says. 

Presenting Higher Default Rates 

Armstrong adds that increasing default rates presented in online enrollment, such as doubling and tripling the most-suggested default savings rate of 3%, can drive participation and savings rates significantly. 

“Let’s say we put a 7% savings rate in front of the user, when maybe the default used to be 5 or 6%,” Armstrong says. “We found that when we studied longer-term savings behaviors, that [a] 1- or 2- [percentage-point]-higher nudge would help them save more on a more sustainable basis.” 

Voya found that suggesting these higher savings rates did not backfire on the participant, nor did they dissuade them from saving. 

In an experiment that involved raising the default automatic enrollment rates for 10,000 employees on their workplace retirement plan enrollment website, Voya found that while setting the rate at 11% did slightly increase the percentage of employees opting not to participate, display rates between 7% and 10% did not.  

Voya also experimented with presenting default escalators of either 1% or 2% per year to different populations. Armstrong says the firm found that the rate of adoption was nearly identical, whether a user was presented with the 1% or 2% option. 

“We know that tenure of employees is going down,” Armstrong says. “So if a new hire comes into an organization and we can get them to save a good amount up front—and then sign up for these rate escalation features or have the plan adopt the rate escalation feature at 2% instead of 1%—if the [employee] is only with that employer for two or three years, they have a higher likelihood of getting up to the 10% to 15% range that we generally believe most employees need to be saving.”  

Visual Design Drives Engagement 

Language, color, order and placement of information on an enrollment website are all elements that can either increase engagement or drive people away, according to Armstrong.  

For example, presenting an “opt out” button in the color red could subconsciously warn an employee that opting out may be an unwise decision for future retirement savings. 

Voya also found that changing opt-out wording to “I do not wish to save for retirement” could cause people to re-evaluate their decision.  

“Even if they didn’t accept the employer default, we could steer [the employee] to a place where they can just save a little bit and eventually get them on a path to using re-escalation techniques,” Armstrong says. 

Order also matters, and Armstrong says placing a default rate option on the left side of the screen tended to get more click rates than the same one on the far right, as English speakers tend to read from left to right. Placing a more optimal default rate on the left side of the screen could potentially drive more engagement, Armstrong explains. 

He says these tools are not a way to trick people, but ways to help employees make critical choices about their financial future at a time when these decisions are made in an increasingly digital space.