Pensions may be one of the last things young employees want to think about, but the right approach can make them see the importance of planning for the future, says Sarah Coles
Marketing executives at Gap are specialists in engaging young customers with the company’s brand. But the human resources department has had to develop a similar expertise in order to meet the challenge of selling the pension scheme on offer to the retailer’s young workforce.
The key to engaging young people with pensions is communication. Gap choses its media carefully to appeal to young people, including funky posters, postcards and a new website. Nationwide Building Society, similarly trying to captivate a young workforce, uses a comic film to debunk the myths of old age. By using the kind of media employees connect with outside the workplace, employers can encourage them to engage with pensions.
The language used is also crucial. Gap initially banned the use of the word ‘pension’ within its pensions literature because it was considered an immediate turn-off. Organisations don’t necessarily need to go that far, but clarity and brevity are vital.
Rather than simply trying to engage staff through passive media such as brochures, employers can go a step further and apply a little pressure. Nationwide, for example, doesn’t hand out copies of its comic film, but makes new employees watch it together as part of their induction. One of the most effective way of communicating with staff is often face-to-face, either in group workshops or individual meetings.
But it is important to get this approach right. Mark Bingham, a director of Secondsight, says: “Presenters need to be younger, interesting, and know how to put the message across. Younger people also tend to have shorter attention spans, so do short, sharp presentations.”
Of course, engaging younger staff isn’t just about selling a message. Employers also need to think about the scheme itself, and how to make it more appealing to young employees. Part of this is to ensure the scheme is generous and robust, with employer contributions that don’t rely on employee contributions, which young people may find hard to afford.
Some employers are also taking a more sophisticated approach. Proquest Information and Learning, for example, asked its younger employees to commit a proportion of their future pay rises to the pension scheme. That means bigger contributions will leave their pay packet in years to come, before they have time to get used to spending the extra money.
But although employers can use a number of methods to engage younger employees with pensions, there is a school of thought that questions whether they should be doing this at all. Young people may have other responsibilities, as Jonathan Watts-Lay, a director of JPMorgan Invest, explains: “If I was in my early twenties, I might have other priorities, like paying off student loans, or buying my first house.”
Young, debt-laden staff are a relatively new issue for employers to consider, and there is a strong argument that graduates need to deal with such financial issues before tying up money in pension contributions. So instead of pushing the pension, employers could help with these other priorities. Since May, healthcare provider HSA, for example, has offered to match student loan repayments for its graduate intake. Mercer, meanwhile, is working on a group individual savings account (Isa) that would enable employers to contribute to more short-term saving schemes.
Some existing benefits, such as employee share plans, also promote saving. Sharesave is essentially a cash scheme, where money remains in a savings plan for the scheme’s duration and can be converted back to cash when it matures. These benefits can be sold to younger staff, who may find the idea of a shorter-term pay-off more appealing. Watts-Lay has also found more and more employers that are converting the benefit to cash.
But not everyone is convinced it is time to give up on pensions for younger staff. “People always have other priorities. Most of them aren’t really paying off student debts or saving for a house deposit, it’s just an excuse,” says Bingham.
He believes employers should work harder to get young staff interested. “We look after ING Direct, where the average age of employees is 23 [years]. We got into their world and talked to them about the difference it would make to their lives, and 90 percent of them agreed to contribute to [a] pension,” he says.
If you read nothing else, read this…
- To engage younger staff with pensions, employers should tailor communications so the media, image, language and approach appeal to this group.
- The pension scheme itself must also be attractive, and can include sophisticated elements, such as committing future pay rises to contributions.
- Alternatively, employers could offer other types of saving schemes, or debt repayment plans, to help with younger employees’ more pressing financial priorities. If all else fails, they can offer cash.
- But with the right approach, pensions can be successfully sold to younger employees.