Just two in five (40 per cent) pension savers understood the investment options available for their remaining retirement savings after taking a withdrawal, despite rating the communication explaining their options highly for clarity, research from Standard Life has revealed.

The findings, published in Standard Life's Understanding Under Pressure report, highlighted a disconnect between how clearly customers believe information is presented and their actual understanding of important pension decisions.

In one test, participants rated a pension withdrawal form 4.3 out of five for ease of understanding, yet only 40 per cent could correctly explain the investment options for the money remaining in their pension after taking a withdrawal.

Standard Life warned that this could leave savers unaware of the implications of remaining invested, switching funds or holding cash, potentially affecting their future retirement income.

Notably, the report found that avoidable complexity and friction, rather than missing information, often made financial decisions hard to understand.

It suggested that these barriers could be particularly significant for customers experiencing vulnerable circumstances, including bereavement, poor health or financial pressures.

The research also found that simplifying pension communications could significantly improve customer outcomes.

In a randomised controlled trial involving 238 customers, those who received a redesigned pension withdrawal form were 2.5 times more likely to return it than those who received the original version.

Calls about the form fell from 40 per cent to 24 per cent, while requests for more information fell from 18 per cent to 5 per cent.

The redesigned form reduced unnecessary complexity, simplified language and made required actions easier to identify.

Standard Life argued that the findings showed firms needed to move beyond assessing whether communications were clear and instead test whether customers could understand and act on the information provided.

Standard Life managing director of workplace and retail intermediary, Emma Furlonger, 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."

Meanwhile, the report also introduced a four-question framework to help firms assess their communications, asking whether customers understand where to start, why information matters, what to notice, and what to do next.

Standard Life lead behavioural scientist, Sophie Kulla, argued that one of the research's clearest lessons is that understanding must 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," she said.

"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."

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