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The Pensions Policy Institute (PPI) has released its latest research findings ‘Engagement pathways in workplace pensions: an overview of pension decision-making’. The report outlines that there may be 12 million individuals who are under-saving for their retirement and highlights the need for a better understanding around how individuals make decisions about their pension following automatic enrolment.
The findings suggest that there are a variety of approaches to pension saving, with groups of individuals engaging with their workplace pension savings in very different ways, and that each group requires specific forms of intervention over time in order to support and encourage engagement.
Jonathan Watts-Lay, Director, WEALTH at work, comments;
“Pensions may not be the most engaging or exciting of topics for employees. But as the research suggests, much more needs to be done to persuade employees to save more for retirement. After all, the pension is one of the most valuable workplace benefits after a salary.”
He adds; “Whilst auto enrolment has been a great start in getting more individuals to save into a pension for the first time, if the member gets used to the contribution rate (currently 8%) they may believe this is the ‘right’ amount and not consider paying more. Our experience is that there are many schemes where employees could take advantage of more ‘free money’ but don’t understand the benefits on offer.”
Watts-Lay asks; “But what can be done to encourage greater engagement amongst employees, and a greater willingness to pay in more than the minimum?”
He explains; “Financial education plays a fundamental role in this. We have educated hundreds of thousands of employees about what they will be able to afford in their retirement, the benefits of paying into a pension, and the value of contributing as much and as early as possible, which helps them to realise how valuable workplace pensions are and how to make the most of them.
Some of this information may be available on company websites or benefits portals, but actually having someone to speak to about pensions, and explain how it is possible to have an adequate income in retirement, is far more engaging. In fact, some of the UK’s leading employers use classroom based seminars to educate their employees about pensions. Once clearly explained to someone, there are few employees who do not take an interest.”
Watts-Lay comments; “However, as the report suggests, the employee population will differ and individuals will engage with their pension savings in different ways. That’s why financial education should be tailored and why a ‘once size fits all’ approach won’t work.”