Comment: Workplace pensions communication needs review and change
24 February 2019
Employer communications need to change if we are to improve worker engagement with pensions saving, says Johanna Nelson, associate director, communications, Punter Southhall Aspire
Our clients often say that they want to improve their employee’s engagement with savings and pensions. This is also supported by research from the British Confederation of Industry and Aegon,[i]which found that just one in 10 companies are satisfied with their employees’ level of engagement with pensions.
In most companies, pensions are viewed as an important employee benefit, supporting recruitment and retention. Ensuring employees contribute into their pension schemes is also key to ensuring that people can retire well, so the business case for improving engagement is strong.
One solution we are advocating in 2019 is for companies to review and change their pension communications.
Last year, Punter Southall Aspire launched a campaign called‘It’s Time to Change’, which included a research report looking at current levels of communication and how this can be improved to impact engagement and optimise employee pensions savings. As part of the research, 2035 UK employees were surveyed.
The report shone a light on people’s attitude to savings and revealed four key issues which employees need to address to develop an effective pension communications strategy. These are:
Pensions aren’t a priority for everyone because ‘now matters more than then’
The first finding was that pensionsaren’t a priority for everyone because ‘people are more concerned with their current finances than looking to the future’. One of the reasons for this is that many have competing financial pressures. Half are paying off a loan or credit card or 45% are supporting dependents financially and 30% regularly use an overdraft facility.
The need for instant gratification also has an influence. 88% said they would rather have £400 now over the chance of £800 in the future and 66% claimed they would be more likely to respond to communications that referred to ‘now’ rather than the future.
Employers can tap into this and provide financial education and communications focused on matters concerning employees now, such as debt management or budgeting. This gives them a route in to talk about the positive benefits of long-term savings into pensions and auto-enrolment.
People fear for the future but aren’t taking any action
Secondly, people are anxious about their financial future but are not actively managing it –some are essentially burying their heads in the sand. Nearly half say their biggest fear for the future is not having enough money in retirement, but almost a third admitted retirement isn’t part of their current financial planning.
One reason is that most people are budgeting monthly rather than looking further ahead and only around a quarter admit they stick to their budgets. Present bias is making people ignore their financial future and focus on immediate needs and wants.
Many people are looking to their employer for proactive guidance on how to save for the future. Communication strategies focused on financial education and budgeting for both now and the future can help, as will providing tools and technology that help to engage employees to feel more confident about managing their finances.
Apathy about pensions is widespread
Thirdly, apathy about pensions is widespread. Nearly one in five of those aged 16 to 24 had no idea if they have a pension and 30% said they don’t think pensions are important. Almost a third (32%) couldn’t remember their contribution rate and claimed it was the amount the employer set as the default.
Another reason for this widespread apathy could be the fact that three quarters say they are optimists and believe their retirement will be fine, despite their inaction. This apathy fuelled with optimism bias reinforces the need for pension communications that can improve active decision-making from members and encourage more pension engagement.
Relevant messaging (based on members’ behaviours) will make communications more meaningful to the member, and thus more likely to stimulate activity. This is where data and technology are crucial; where digital processes can recognise member trigger points and send out relevant messages.
When it comes to tackling naïve optimism it’s important companies don’t build campaigns around the risk of future issues, but highlight the positive benefits of saving more and making active decisions.
Employers need to consider stepping up their communications
Finally, employees want better pension communications from their employer. Over 80% said they want their employer to guide them in a positive direction about pensions and 72% want them to educate them about planning for the future. 68% would also like their employer to keep reminding them to review their pension, even if they don’t respond to their communications.
But traditional communication tactics are in need of an overhaul. People don’t respond to scare tactics commonly used in pension communications, but react to exciting messages, suggesting the need for companies to use positive and relevant messaging and emphasise the benefits of saving more.
The best ways to capture their attention with marketing and communications materials is with ‘powerful imagery’, ‘humour’, ‘moving words’ and ‘colour’.
This research highlights that the employer is an essential and influential voice for employees when it comes to pension decision-making. They are in a strong position to help ensure employees have a financially secure retirement by providing financial education. This is best done through positive communications to encourage a savings culture.
Punter Southall Aspire has created a 7-Step communications model which offers a bespoke and strategic approach to improving pension communications. It can help companies play a more active role in educating their workforce about workplace pension savings.
What are the top skills employers typically want to see from a paraplanner? Lewis Byford, co-founder of financial services...
Are you signed up to the Professional Paraplanner daily website alert? For more technical, tax, pensions, investment, retirement, protection...
With £355 billion of debt having been accumulated in the past year and a potential £204 billion or more to be...