Perhaps it’s better to introduce the simple concept that if you pay in money then so will your employer and the government, and – with defined contribution (DC) schemes – talk more along the lines of savings generally, explaining that equity values can fluctuate but that regular saving enables you to buy more units when markets are down.
If younger people, in particular, are going to prioritise pensions at a time when they have so many other things to budget for, then simplicity and careful targeting are key.
Chris Connelly, Propositions and Solutions Director for EQ Paymaster, says: “I would argue you don’t need to explain the ins and outs of their entire pension. Employers and schemes that want to communicate to employees could start more broadly and shallow in detail, first addressing fundamental questions like why they need a pension and what it does for them.
“It’s about being more aware of the person who owns the pension, and about what’s going on in their lives that helps trigger what they want to have and when. Many have commonly moved away from blanket communication messages towards giving more targeted information to different groups. The next stage in that progression, which is already happening, is personalisation.”
Total reward statements, which enable employees to view all their employee benefits in one place and gain a better understanding of their true value, are playing a key role. Once annually printed documents, employees can now view current information when and where they want.
These portals and the growing use of podcasts, videos, webinars and social media in communication programmes are proving especially important in engaging the younger generation, who have grown up with their lives revolving around smartphones.
The launch of the Pensions Dashboard from 2023 – to help people keep track of their different pension pots and view all their pensions information in one convenient place – should also boost employee interest in pensions and provide opportunities to engage those who didn’t even know they had one.
Chris adds: “This new volume of traffic, of deferred members in particular, is relevant to anyone planning a three-to-five-year engagement strategy. But, although there’s still lots of ongoing debate about the details that will appear on Dashboards, such as costs and charges, shouldn’t communication on the basics be a higher priority first? After all, its primary aim is to reconnect people with pensions.”
The ESG opportunity
The current focus on environmental, social and governance (ESG) investing should also be capitalised upon, especially as it’s concerned with long-term issues and pensions is a long-term form of saving.
Chris continues: “ESG seems a really good way of getting people engaged with money and making them think about where it’s invested. Evidence suggests that younger cohorts are more interested in ESG, but the message also resonates with a wide range of people.”
Herein lies the nub of the communications problem. Individuals don’t all fit neatly into broad brush generalisations. You need to actually find out what people believe and care about, not just make assumptions.
*This article was written for, and features in REBA, October 2021