Need to know:
- A year-round pensions engagement strategy can help to maintain and increase interest levels over the longer term.
- Certain personal and national events can serve as opportunities to shine a spotlight on pensions and build momentum.
- Including pensions in a wider financial wellbeing strategy can enable staff to better visualise the impact current pensions engagement can have on their future lifestyles.
Increasing understanding of the impact pension saving has on the lifestyles and choices we aspire to in retirement, and the steps that need to be considered to achieve these, is not a quick or easy task. A sustained, year-round approach to pensions engagement can help to build employees’ pensions knowledge and empower them to take action that supports their financial health in retirement.
Set clearly defined goals
The first step to developing a pensions engagement strategy is to define what the strategy aims to achieve, the activity it is trying to promote, and how success will be measured. Identifying the advantages to the organisation that such a strategy could bring can also play a key role in the level of support provided to deliver it effectively.
David Pugh, managing partner at Lemonade, says: “Starting with a focus on why it benefits the business really helps to get executive buy-in. Then it’s a case of thinking about existing resources in terms of HR and external consultants, and whether they have the time and expertise to deliver the plan.”
Setting short- and medium-term goals that contribute to the ultimate aim of a long-term strategy can provide focus points for each stage of this approach, and prevent multiple messages from competing for attention, which can reduce their impact. If the long-term goal is to generally improve engagement with the pension scheme, for example, a medium-term target may be to increase pension contribution levels or encourage a proactive approach to investment choices, says David Millar, head of client communications at JLT Employee Benefits.
Make the most of occasions to build momentum
Particular events that occur throughout the year can be seen as an opportunity to gather momentum around a pensions engagement strategy. Personal milestones, such as when an employee passes their probation period, when they receive a pay rise or are awarded a bonus, or perhaps when they celebrate a significant birthday, as well as workplace-wide events, such as open benefit selection windows, can be used to shine a spotlight on pension saving at a time when staff might be more open to reviewing, and potentially making changes to, their current level of involvement with the pension scheme.
National events can also serve as touchpoints for engagement. For many organisations, this will take the form of communications around changes to pension legislation, but for those organisations that already have a well-established pensions communication strategy in place, this could also extend to current events in a wider sense. “There’s been a huge amount of coverage on Brexit and the word ‘pension’ has come up a lot of times,” says Millar.
“If [an employer] is starting from a base of never having communicated [about pensions] then talking about the impact of Brexit on pension savings is quite a difficult link to get across to staff. But if it has been regularly communicating then this is an opportunity to tie something that is happening in the national consciousness to workplace savings, and that’s the kind of thing that builds momentum.”
Trevor Rutter, communication consultant at Like Minds, adds: “It’s a matter of timing to make sure that [employees] get messages at a time when they are, a, likely to look at them and, b, they are able to do something about it.”
If an employee is unable to immediately take action prompted by the communications, then it may be all the more difficult to engage them in similar behaviours on subsequent occasions.
Avoid pension silos
Including pensions in a wider financial education and wellbeing strategy can improve employees’ understanding about how pension saving relates to their financial situation and lifestyle, both now and in the future. Pugh says: “A lot of [organisations] beat the drum around pensions but I think [an engagement strategy] needs to involve a range of elements around financial health, such as surveys, and interactive tools.”
The introduction of new online tools can also provide a good opportunity to re-engage staff with their pension scheme. Phil Farrell, partner at consultancy Quantum Advisory, says: “We’ve seen a real increase in interest in pensions from people when you give them access to online capability; online access and the ability to model scenarios are really powerful tools.”
However, a continuous communications approach is still required to maintain employees’ interest. “It needs a drip-feed [communications approach] to keep people engaged on a regular basis so that they keep going [online] and looking at their account,” explains Farrell.
As Rutter says: “Most communication programmes will only work if [employers] keep at it. The beauty of having a programme that has regular staging posts throughout the year and tries to build momentum over the long term, is that it recognises the fact that [they] are not just hitting [employees] with a one-off event and then going to sleep on the subject until the next year.”
Gerald Eve engages staff with pension saving through bonus scheme and financial education
Property consultancy Gerald Eve, which employs more than 430 staff across nine UK offices, utilises a range of communication channels and topical and lifestage-focused financial education support to engage its employees with pension saving.
Gerald Eve has a high pensions take-up rate, with 93% of eligible employees saving into the group self-invested personal pension (Sipp) scheme offered by the organisation through a pensions salary sacrifice arrangement.
The organisation also runs a scheme that enables staff to waive some of their bonus directly into their pension. Employees are reminded of the scheme in communications about their annual salary review. Helen Foley, HR manager at Gerald Eve, says: “We had an increase in take-up [of this scheme] this year compared to previous years, so it’s clearly something that people are starting to use more and think about more.”
Staff have access to an online workplace savings platform, provided by Hargreaves Lansdown, which enables them to take an active role in their pension investments should they choose to. The platform also provides access to other savings vehicles, such as a stocks and shares individual savings account (Isa) and a cash Isa.
Gerald Eve ensures its employees are informed about their pension options from day one; new starters receive informational material from both the employer and pension provider upon joining the firm, and each September Gerald Eve’s graduate intake participates in a financial education session to engage them with saving from the very beginning of their tenure with the organisation.
One-to-one financial education sessions, run by Hargreaves Lansdown, are available to staff on site around twice a year, in addition to group sessions. As a follow-on from the graduate sessions, the organisation has also offered financial education support to staff that addresses the factors that may be most important to them through different life stages, whether that be preparing to have a family or approaching retirement. Employees who are beginning to think about retirement also have the opportunity to take part in off-site seminars, provided by Close Brothers.
Foley says: “We’re lucky in that most of our managers are very transparent and able to have those open and honest conversations about long-term planning. That’s important in terms of succession planning and planning for the business, and being able to support [staff] in the right way in terms of planning for retirement.”
Information about the workplace pension scheme is available on the intranet, in addition to communications in emails and the organisation’s HR newsletter. Gerald Eve makes use of targeted emails to inform employees about changes to pensions legislation that are relevant to them, which are designed to complement communications sent out by its pension provider. The organisation gave staff the opportunity to attend a session focusing on the annual and lifetime allowance reductions, run by its pension provider, and plans to offer another session on this topic later this year to increase employees’ awareness of the changes.
“We find that it’s about doing what makes sense at the right time,” explains Foley. “With all the changes in pension legislation, it makes sense to have people come in for face-to-face sessions, but we have also sent out emails targeted at different groups that would probably be more affected by the changes.”
Viewpoint: Pensions education must start early on in employees' working lives
Automatic enrolment owes its success to the harnessing of inertia. Employees are, by default, enrolled into their employer’s pension scheme and contributions are automatically deducted and invested on their behalf.
However, in spite of its success in bringing so many employees into workplace pension saving, automatic enrolment is not on its own sufficient to guarantee optimal retirement outcomes. Ideally, employees should be actively engaged with retirement planning from an early age.
In an era where the vast majority of private sector workers are enrolled into a defined contribution (DC) pension scheme, it is vital that they have a realistic understanding of the contribution rates required to generate an adequate retirement fund. Currently, the statutory minimum contribution required of employees is just 1% of earnings over the £5,824 lower earnings threshold. In monetary terms this is trivial.
While statutory minimum rates are set to rise in coming years, it would be preferable for employees to understand from the outset that retirement saving is a significant financial commitment and are, therefore, prepared to budget accordingly.
With a liberalised regime governing the use of retirement savings, it is important that employees understand exactly what their options are. Ideally, they should be considering how they might use their savings and give thought as to when this is to happen. A growing problem in future years is the spectre of longevity risk; with annuities no longer a statutory requirement it is inevitable that some retirees will outlive their savings.
A workplace education programme that promotes effective engagement is the best way of ensuring that employees understand pension saving and are empowered to make informed decisions. Such a programme should start early in an employee’s working life.
A key aspect of effective engagement with workplace pensions is understanding that discussion of pensions is not just for those approaching retirement but is a topic to be addressed at all stages of a career.
Tim Middleton is technical consultant at the Pensions Management Institute (PMI)
