Pensions are a significant benefit to employees – yet many of them don’t fully appreciate its value. Joint CBI/ Aegon research suggests (perhaps unsurprising) that the people most likely to be engaged are those in the age 50 plus bracket. Higher earners seem to be more engaged too with the research finding that 87% of people earning £45-75k are considerably more engaged than lower earners.
That leaves a lot of employees who aren’t engaged with their pensions. In other words, they don’t really understand their own pension scheme or the value of their pension pot. It’s likely they don’t really grasp how much they and their employer are paying in. It’s certainly very understandable.
With numerous financial priorities competing against one another, it’s not always easy for employees to appreciate what they have when it comes to their pension. It could even be the case that having a pension is perceived as a negative, a much- needed portion of income that’s taken off them and ‘disappears’ into a pension pot.
Is lack of engagement an issue?
If employees don’t understand and therefore never review their pension, they’re unlikely to be getting to grips with any kind of retirement planning. Many employees are unclear on how much they need to save for retirement and the extent to which their workplace and state pensions will be able to provide for them in the future.
That means they could be leaving themselves in a very vulnerable position. This lack of understanding means it’s very hard for them to be able to make informed decisions.
From an employer perspective, it also means employees are not really appreciating what can actually be a pretty substantial part of their total package. A good pension can be an important part of overall efforts to recruit and retain employees – but only if it’s articulated clearly.
Unfortunately, pensions have become something that many employees view as too complicated to understand and frankly, pretty dull. Is there anything companies can do about this?
- Keep communications simple
The most obvious thing employers can do is look at the way they communicate pensions. It’s a world full of jargon. For people who aren’t experts in the field (which equals a lot of people) it can be an instant turn off. Communications need to be clear, straightforward and free of as much pension-specific language as possible.
- Make it relatable
Consider what can be done to personalise information as far as possible so it feels relevant to someone’s specific circumstances. This can be harder with a larger workforce but it’s still possible to make communications more targeted towards the issues that are most likely to be going on in employees’ lives.
Younger employees, for instance, might be particularly struggling with other financial commitments like student loans or saving to buy a home. Pensions can be presented as being part of an overall positive savings habit perhaps, and also as an opportunity to receive extra pay from the employer thanks to its contributions.
- Make it part of an overall approach to financial wellbeing
One way to keep pension engagement alive is to make it part of an overall company approach to supporting employees with their financial wellbeing. Regular financial awareness sessions can help boost employee knowledge and confidence. It enables employees to see their pension as part of a bigger picture of saving. Point people in the direction of online pension calculators and resources like Pension Wise. Get involved in campaigns like Pension Awareness Day by setting up workshops or online campaigns. As employees move closer to retirement, more targeted sessions can take place.
They can provide more tailored advice and help employees identify if there could be any shortfall in pensions versus the income they were hoping to have in retirement.
The Pensions Dashboard
There are encouraging signs that employees could be more receptive to pension information that’s less fragmented. Recent Ipsos Mori research revealed that about two thirds of respondents favour the planned introduction of the pensions dashboard which will hold information about all of an individual’s pension investments and state pension allowance in one place. It could be particularly helpful to employees who’ve moved around over the years and have a few smaller pension pots.
Moving away from files stuffed full of paper pension statements towards holding all information in one easily accessible online location looks like being a major step forward towards engaging employees with pensions and offering more clarity and control.
The level of positivity in the survey reflects the value of giving employees easy access to their information in a simple to understand layout. It’s not only pensions that can benefit from this of course.
Many businesses are moving away from fragmented paper systems and looking towards innovative online solutions that manage HR and payroll activity while also giving employees access to their information. If this is something you’re considering, please do contact us to find out more about how we can help you achieve it.