How can employers create greater employee engagement with pensions?

employee engagement with pensions

Need to know

Rather than focus on pensions, employers can teach concepts such as regular savings and stock market investment as part of broader financial education.
An audience can be segmented by factors such as age, life stage, bonus and size of pension fund to make communications personal.
Employers should ditch the jargon and make pensions fun with interactive tools, apps and games.

Retirement savings have come a long way since the days when a poor-value annuity was the only option for a pension pot that had already been ravaged by high charges. But, while today's workplace pensions may offer much better value to employees, engagement is essential for the best retirement outcomes.

Auto-enrolment has boosted the number of people in pension schemes, but this alone will not deliver a decent retirement income. Nathan Long, senior pension analyst at Hargreaves Lansdown, says: "[Employers] need employees to take individual ownership of their pension. Do this and not only will they take the right steps to secure a better retirement income, they'll also value their pension more."

Encouraging greater engagement benefits employers too. Pension contributions are a significant, and rising, cost so it makes sense to highlight the value of this commitment to employees.

Longer-term, it can have an even more profound effect on the workplace. Retaining older employees can be a bonus when they are happy to keep working but, where they are disgruntled and simply clocking up the hours to top up their retirement income, this can have a less beneficial effect on workplace morale.

Communication challengeThere are several challenges when it comes to engaging employees with their pensions. As well as a broad audience, running from first jobbers often saddled with student debt to older employees approaching retirement, pensions do not exactly have the most interesting image. Ranila Ravi-Burslem, director of marketing at the National Employment Savings Trust (Nest), says: "Most people fall asleep if you talk to them about pensions. But ask them what sort of retirement they want and you get a completely different response."

Talking to employees about saving rather than pensions can make a difference. "For a 20-year-old, it's all about saving consistently, even if it's not a huge amount," she adds. "Getting them used to not seeing the money is key."

Having this broader financial education focus may be especially pertinent for younger employees who may be more focused on saving for a mortgage deposit. Damian Stancombe, partner in workplace health and wealth at Barnett Waddingham, says: "It's very hard to push the pension in isolation so offer more holistic financial education instead. If [employers] can teach a 20-year-old about budgeting, they'll be in a better position to start saving into a pension."

Personal touchMaking communications as personal as possible will also help. Martin Parish, area director at Aon Employee Benefits, explains: "Blanket communications can be a real turn off. The more personalised the message, the more [employers will] drive engagement."

Employers have a wealth of data that can help them build a better picture of their employees from a pensions perspective. "Everything from a marriage and the birth of a child through to pay rises, bonuses and an increase in their pension contributions can help [employers] tailor [their] communications," says Parish.

For example, if an employee gets married it is sensible to notify them about changing the benefit nomination on their pension, or if they receive a chunky bonus, they might appreciate being told about the tax savings available if they redirect it to their pension.

Age is also an important trigger. While starting early can make a huge difference to an employee's final pension pot, it is also important to ramp up engagement around age 50.

As well as all the choices around how they eventually take their pension, there is still time to boost savings. "At 50, retirement is close enough to be real but far enough away to influence it," says Long. "Paying in £80 more a month could turn into an extra £25,000 by the time they retire."

Make pensions funBut whatever age, life stage or motivation, keeping messaging as light and simple as possible is key. Jonathan Bland, director at Pension Geeks, says: "I used to think people weren't interested in pensions. But they are, as long as [employers] communicate with them in a way that resonates."

As well as ditching the pension jargon and using language that is accessible, thinking about the media different demographics use and the information the employer is trying to communicate can also make a difference. "We use social media such as 30-second videos on Instagram to engage with younger people but, for older employees where the messaging can be more complex, it may be more useful to give them a leaflet they can read in their own time," explains Bland.

Interactive tools, such as calculators, that show an employee what income their contributions will generate can also be a useful way to encourage employees to take control. These can even be a bit gimmicky, especially where engagement is generally low. A good example of this is Scottish Widow's Age Me game. Robert Cochran, senior corporate pensions specialist at Scottish Widows, says: "This looks at the employee's pension situation today and ages a photo of them to the point when they'll have enough to retire. It can be a bit of an eye-opener but it's also a great way to start pension conversations in the office."

Beg, steal or borrowThere is plenty of support for employers keen to boost pension engagement. As well as material from their pension providers and advisers, employers can also access free support from the Good Communications Guide, which was launched by the Pension Quality Mark at the end of September. It covers everything from understanding an audience through to behavioural economics and going digital.

It is also worth looking at the pensions engagement experiences of other countries, with the likes of Australia and the US much more advanced than the UK. While this is partly due to a greater acceptance of self-provision, there are lessons to be learnt, says Long. "In Australia, people really start to engage with their pension when it's worth more than their car," he explains. "It could be worth having this as another trigger point in the UK."

Chris Curry: Employers can take a mixed approach to helping employees save for retirement