The Voya Behavioral Finance Institute for Innovation, in conjunction with Carnegie Mellon University, the University of London and UCLA, decided to conduct a study to determine if relatively simple adjustments to a retirement plan website would have an impact on participants.
The scientists explored three relatively simple changes. First, they moved important plan information, such as information on the default savings rate, closer to where the individual was prompted to act. Second, they simplified and standardized language associated with enrollment options. And, third, they tested whether enrollment is affected by replacing standard orange-colored buttons associated with each enrollment option with traffic-light colors. The idea is that such colors could shift behavior by either focusing attention on a specific option or by conveying an implicit recommendation. In one set of conditions tested, for example, the most personalized option was presented as green, the automatic option was presented as yellow, and the decline option was presented as red.
The findings reveal that these changes inspired participants to personalize their enrollment, to take advantage of the company match and to increase their savings. According to researchers, with such changes, the number of participants who personalized their enrollment increased by 15%. Among this group, the average deferral rate was 7.8%, compared to 3.4% for those who accepted automatic enrollment.
The enhancements resulted in a 19% increase in the share of employees who took advantage of the company’s full match. The design changes also boosted the overall contribution rate by 62 basis points.
“When it comes to helping workers with their retirement security, the industry has historically focused on automatic enrollment and providing generous match incentives as the primary tools for moving them in a positive direction,” says Charlie Nelson, CEO of retirement and employee benefits at Voya Financial. “While we should continue to apply these important strategies, this latest research suggests that making simple adjustments to website architecture presents another promising way to improve the choices of auto-enrolled workers.”