Need to know:
- The pensions freedoms mean there is more need for employers to facilitate online access to pensions.
- Modellers and apps are helping people map out potential retirement options.
- Robo-advice is providing tailored guidance to employees without the need for a financial adviser.
- Some platforms can link with other pension pots, personal savings or employee benefits.
Since the arrival of the internet two decades ago, pension and employee benefits providers have gradually deployed online capabilities to help employers and employees view and operate their pension schemes. Many, though, have got no further than simply allowing employers to on board new staff and amend details, and employees to view and edit personal information, as well as access statements and investment history.
Access to more detailed information
Yet the pension freedoms introduced in April 2015 have given employees far more reason to take an active interest in their retirement planning. Today’s employees need to be able to access greater levels of information, including forecasting future positions, and to be able to take control of their pensions from any device. Lee Cook, a principal at Xerox HR Services, says: “End users expect a consumer-grade experience due to their daily interactions with applications such as Facebook and LinkedIn, and will quickly dismiss ineffective solutions. Market-leading modellers are now using gamification and other nudge techniques, all of which help to drive better member outcomes.”
From an employer perspective, providing more effective technology through the right channels not only helps to reduce unnecessary costs but can also drive greater appreciation of pensions in general. Rod Bryson, principal at Capgemini Consulting, says: “Consumer behaviours have evolved over the last seven years or so, following the introduction of the iPhone and related smart technology. This provides a fantastic vehicle to quickly distribute information in an easy-to-read format.”
Many platforms now make use of modellers or apps, giving employees the ability to play around with their contribution levels, risk appetite and planned retirement age to identify a strategy that could work for them. Julia Turney, head of platform and engagement at Barnett Waddingham, explains: “This enables them to see all the possibilities and decide what income they will need, and what they can expect, during retirement.”
Working with its partner Mubaloo, Equiniti has developed both an accumulation modeller, which can sit on a self-service portal for employees, and a drawdown equivalent. Robert Llambias, head of product strategy at Equiniti Pensions Solutions, says: “It allows employees to model after-retirement draw-down until their money runs out, using assumptions that can be changed around contribution rates, growth rates and even charge rates.”
Overview of employee benefits
Some platforms allow employers to offer their staff the ability to see their pension saving alongside other savings accounts or even employee benefits. For example, Thomsons Online Benefits’ Retirement Planner Tool, which sits within its Darwin employee engagement package, enables employees to add in the value of their other pension investments, as well as making wider salary sacrifice decisions, while Aon Employee Benefits’s Bigblue Touch includes retirement modelling and transactional capabilities, as well as a broader money module to help employees keep on top of their personal finances.
Another growing area is that of robo-advice, where employees can access online investment advice based on their own circumstances, desired outcomes and attitude to risk. Initially, the motivation from employers is often to find a cheaper alternative than facilitating face-to-face financial advice, but this kind of interaction can also appeal to employees, says Andrew Firth, chief executive officer of online pension adviser Wealth Wizards. “Offering a visual app, which employees can engage with at their desks, is extremely appealing to a number of people,” he adds.
One big area that is not yet being fully addressed is the issue of dormant pension pots, which could play a significant role in the decisions employees need to make around retirement. Michael James, head of technical architecture and principal consultant at Altus, says: “As employees move from job to job, there is a need for a proper technology solution that enables them to transfer and discover past pensions. Information about where individuals live, how old they are and their benefit preferences will be taken into account.”
The ultimate destination will be for employers to be able to offer employees the kind of experience they currently receive with other financial products, says Chris Deeson, chief marketing officer at Systemsync. “When consumers can interact with their pension on their phone on a daily basis, then pensions will have become truly mainstream,” he says.
BMT Group offers employees automated pensions advice
Having moved from a defined benefit (DB) to a defined contribution (DC) scheme in 2011, maritime engineering business BMT Group wanted to ensure its 780 UK employees were able to develop a sound retirement strategy.
The business initially considered bringing in a financial adviser but was introduced to the concept of robo-analytics by its benefits provider Opal Benefits, which then put it in touch with Wealth Wizards.
Daisy Mason, HR business partner at BMT Group, who also sits on the pensions governance committee, says: “We wanted to take the risk away from the business and provide employees with advice without them having to take too much time out.”
The system asks individuals a series of questions around their attitude to risk, investment experience and number of years to retirement, before delivering advice around how and where to invest their pension fund.
The package itself sits on the employer’s intranet site, which then links through to the Wealth Wizards site. “We have a video on the front page with our director of HR, development and training introducing it and explaining why we’ve gone for it,” Mason says.
The business ran a number of roadshows last summer and launched the scheme at the end of August. “It’s given us an answer to the questions we get from people who are engaged in pensions and want to know more, but it’s also helped engage people who were unsure about it, as well as new employees,” says Mason.
BMT is now looking at facilitating advice around decumulation, as well as investment. “We’ll review it on an annual basis but we are thinking about having some kind of at-retirement proposal as well,” Mason adds.
Viewpoint: Smart technology can drive engagement with retirement savings
Achieving effective engagement with employees about their retirement benefits is crucial for an employer to get the best return on such spend. If people do not understand something, it is virtually impossible for them to appreciate its value.
Smartphones and tablets can now make this far easier, but this needs more than just a mobile version of an employer’s old benefits portal. To get the best traction the experience should be truly personalised. Integrating information that gives insights in the context of individuals’ day-to-day lives can take engagement to a whole new level.
Intelliflo, the leading CRM software supplier to UK financial advisers, added a Personal Financial Management (PFM) module to their client portal last August. PFM uses information from users’ online banking, credit cards and other personal finance data to provide a far more informed view of individuals’ finances. Of the 700 adviser firms who offer this Intelliflo service to their clients, 250 already find customers using it every day.
The most advanced example of PFM we have seen in the employee benefits market is Aon’s Bigblue service. As well as enabling staff to better understand their day-to-day finances, they can project forward their retirement income needs based on their real expenditure, including any other retirement savings schemes they may have in addition to their employer arrangements.
Health data from wearable devices is another great way to drive member engagement. Mercer’s Harmonise platform now integrates information from devices such as Fitbits and the Apple watch into healthcare information. An increasing and diverse range of organisations will enhance employee engagement via mobile apps. For example, accounting software provider Xero offers an employee app, Xero Me, which delivers payslips, enables holiday requests and even allows staff to complete time-sheets from their mobiles.
In the future, integrating different services without confusing staff will be an important consideration for HR and benefit teams in achieving the most effective engagement.
Ian McKenna is director at the Finance and Technology Research Centre