- Choosing a pension provider that offers easily accessible and age appropriate investment education can increase employees’ confidence on the topic.
- Investment fund choices for employees with specific needs or beliefs ensure wider needs are met.
- Offering financial guidance and advice, as well as signposting to resources, will inform employees about what they need to know.
In its March 2024 report, the Pensions and Lifetime Savings Association (PSLA) revealed that while 82% of savers understand their pension is invested, only 26% know what it is invested in. Given that 69% believe they lack the skills to choose where their scheme should invest, there are opportunities for employers to step up and improve employees’ confidence on the topic.
Identifying what employees know
Before providing support and guidance on pension investment choices, employers may want to first establish what level of knowledge their employees already possess. Internal surveys can provide an insight into what they know and would like to learn.
Employers can find out their employees’ current position and support their decisions by providing financial guidance, says Jen Norris, director at Isio. “This allows for a more holistic approach, understanding how much and when, and being led by overall financial objectives,” she says. “This should then be followed with expert financial advice.”
Choosing a provider that offers regular updates will ensure employees stay up to date. Employers should bear in mind that not everyone will want to know each detail, so they could segment their workforce by age, or requests to learn more, to avoid overwhelming them with information.
Employers could also encourage staff in their 40s and 50s to use the government’s digital Midlife MOT to take stock of their finances, skills and health. This can reveal what they need to know for the future and highlight where organisations can help.
Improving knowledge and confidence
Implementing a supportive tone from the start can make it easier for employees to recognise the benefits of their pension investments and establish ownership of their financial future. Organisations should then ensure they choose a provider that offers introductory investment education that is life-stage appropriate and easy to access, including options for specific needs and beliefs. If they make changes, it is helpful to explain why and how this will affect staff.
Employee understanding can also be improved by providing accessible introductory information hosted on the organisation’s intranet or a provider-hosted pension microsite, says Georgie Edwards, head of defined contribution at TPT Retirement Solutions.
“Providers may also share educational materials aimed at employers for them to distribute at key moments,” she explains. “Employers can also remind staff of how to access their online pension account and give them time to watch webinars or attend on-site clinics. Many providers will explain investment options and additional risk and sustainability metrics to help fund choices be understood and evaluated.”
While some employers may leave pensions education to scheme providers, others could signpost to useful resources. One example is the government-funded money advice service MoneyHelper, which offers free, impartial information, guidance and digital tools about pensions and retirement, including advice on investment options. MoneyHelper’s Pension Wise offers retirement options appointments for staff aged over 50.
It is important for employees to make decisions around how much to save, maximising matched contributions and when to retire, says Norris. “Employers may want to focus on these levers and just provide reassurance that, in most cases, good quality investment decisions are being made on the employee’s behalf.”
Communicating key information
When communicating workplace pensions and investments, employers should bear in mind that employees’ existing knowledge will vary greatly. They should explain why saving for retirement is important; that they pay into a workplace scheme unless they opted out; and what type of scheme and provider they have.
Employees are likely to be invested in a default fund, so sharing provider performance updates, articles or videos, and reminding them where information in their online account is will be beneficial.
“Employer communications must be straightforward,” says Norris. “If it’s an update on the default investment strategy, the objective is to reassure that it is being suitably managed. There should be clear calls to action to ensure this remains the case, such as updating default retirement age or online details.”
Organisations with defined contribution (DC) schemes should tell employees how much the employer and employee contributions are, whether they pay in more than the legal minimums and if they offer a contribution matching scheme.
Mark Smith, head of saver engagement at the PLSA, says: “Pension providers’ online portals say a great deal about the scheme’s investment strategy and other available options. The fund’s factsheet will tell [employee] its aim, details of associated investing charges and how it has performed against similar funds over different time periods. It will also show a breakdown of the assets the fund is invested in, such as equities, bonds, cash and alternatives.”
TPT Retirement Solutions’ Edwards adds: “Employees should be aware that their pension provider is responsible for the investment range and must regularly review their default fund choice to demonstrate that it offers value for money, while employers review the provider to ensure it continues to deliver good outcomes.”
As their end goal, employers should offer a well-rounded pension solution that continues to develop and engages employees at different life stages so they are confident in their choices and can retire well.
