Let’s open with a fictional workplace scenario. A salesperson walks confidently into a warehouse and demonstrates an innovative electronic device to a firm’s attentive employees. A £10 note is pushed into one end of a hand-held machine. Seconds later, a £20 note appears at the other end. The workforce is stunned and everyone in the company wants to buy one. They love it. It’s new tech, it’s portable, and it makes money. Then there’s a further shock when the salesperson reveals: “you’ve already got one of these. It’s your pension scheme!1
Of course, there are many ways of engaging employees with their workplace pensions, and sometimes it can be extremely challenging, particularly with younger members of staff. Recent research 2 by Aviva showed a huge ‘knowledge gap’ about saving for retirement. It revealed that almost half (47%) of employees do not know how to plan for retirement, while 42% have not even started thinking about it yet.
Employers can help play a big role in tackling this knowledge and engagement gap by providing information and guidance to employees about how to maximise their finances in later life. The potential benefits are many: engaged scheme members might well be motivated to perform well and could be less likely to suffer financial stress. In addition, there’s the possibility that they could retire at a time that’s right for them. But for many employees, pensions remain shrouded in mystery or clouded by worry.
So, what can we do to encourage all employees to become engaged with their retirement savings? Here are five essential ways to help make this work.
1. Make it a big part of induction
It’s worth taking a look at your induction processes to make sure they cover workplace pensions in depth at the earliest possible stage. As well as dealing with this subject verbally, include details in an information pack for new employees to take away – and make sure the language is as straightforward as possible. You can also signpost where new members can go for support.
2. Embrace helpful online planning tools
Pension providers’ websites often include online tools to show the potential effect of increasing or decreasing payments. Directing scheme members to these tools can help them to reach a new level of understanding, as they can show how adding a relatively small amount to their contributions can make the difference between a satisfactory lifestyle in retirement and merely ‘getting by’.
3. Financial education for the bigger picture
Financial education seminars are a great way to get people thinking about the future.
You could recruit pension providers and other professionals to help employees to look at their finances in general, rather than concentrating solely on pensions. When they’ve seen the ‘big picture’, many employees may feel inspired to take a more active role in planning their long-term futures. They also need to know that auto-enrolment doesn’t mean automatic financial security. Instead, employees should be thinking about the lifestyle they’d like to achieve and how to get it.
4. Tailor communications for different generations
It’s important to ensure that your pensions communications acknowledge the different needs and priorities of employees. For example at different life stages, with younger workers, communications on saving in general may be useful – the word ‘retirement’ is likely to be a turn-off.
When you’re talking to employees aged 30 to 50, acknowledge the fact that they’re likely to be dealing with more immediate concerns, such as the expense of raising a family. Employees who are closer to retirement will be more aware of the need to plan for it. Support them by encouraging them to think about the decisions they need to make from age 55.
5. Timing matters
It’s not just a matter of what you tell your employees, or even how often you tell them. It’s also about when you tell them. Perhaps just before the end of the tax year or before an annual bonus is paid.
With so many financial pressures, it’s easy to understand why your employees may be reluctant to think about a retirement that could be a long way off. But we all know how quickly time goes by, so it’s worth putting in a little effort to get your employees to think about their future.
A pension fund is the basis for most people’s retirement and the standard of living they enjoy after work. If you can take steps to help make that future brighter for your employees, you can be sure they will thank you for it when the time comes. Why not start by using some – or all – of these suggestions to get your people thinking about what kind of a future they’d like to have.
It’s always worth gaining insight into what employees are thinking about pensions and workplace benefits, which form part of Aviva’s Age of Ambiguity initiative. In our latest report ‘Thriving in the Age of Ambiguity’*, we asked what employees have gained and lost in financial wellbeing during the pandemic – and what employers can do to boost future resilience. Download the report here.
1Assumes an individual is a basic rate tax-payer in a pension scheme paying the minimum level of contributions. A £10 net employee contribution would attract £2.50 in tax relief and an employer pension contribution of £7.50.
2Aviva report ‘Thriving in the Age of Ambiguity’* 2021
This article was featured in Pensions Aspects magazine September edition.
Last update: 15 September 2021