Here are three ways pension technology can boost engagement among employees and increase their chances of enjoying a comfortable retirement.
- Interactive portals that put employees in control
Many employers provide information about pensions on their employee benefits portals. Making information accessible in this way helps to drive awareness and can encourage people to take action to improve their situation.
However, portals that allow workers to interact with their pension arrangements, rather than just reading about them, often achieve the best results. A recent Competition and Market Authority (CMA) report on current accounts found that “annual interest statements have virtually no effect on consumer actions. But given immediately actionable information – text alerts and internet banking – overdraft charges can be reduced by consumers by almost 25%”.[i]
The lessons from banking also apply to employees. Giving them the ability to do even small things such as change their address can help to boost engagement. And offering them the flexibility to tailor their benefits to their individual circumstances - for example by giving them the option to withdraw up to a total of £1,500 to pay for financial advice - will make them feel a lot more in control.
- Dashboards and modelling tools that show the big picture
Retirement income modelling tools have become a lot more advanced in recent years, with some now allowing you to input information about other incomes you can expect to receive, for example from the State Pension, savings or a rental property.
Provider-issued examples of this type of product include Aviva’s Shape My Future app, which provides online tools and calculators to help members visualise their lifestyle in retirement.
Over the next few years, we will also see greater transparency and access to information thanks to pension dashboards.
Organisation for Economic Cooperation and Development (OECD) research indicates dashboards that give people an easy-to-use overview of their likely pension finances can be powerful tools for “transmitting information, encouraging people to take action, and in particular for keeping track of multiple pension pots”.[ii]
Over coming years, the UK government will be legislating to ensure pension schemes and providers make information available to dashboards. Those dashboards will emerge from financial services companies over the next two to five years. Also, MaPS (Money and Pensions Service – the Government body responsible), will be launching its own Pension Dashboard. This will offer individuals free, user-friendly access to data about all their retirement savings – including any forgotten pensions.
It’s very timely, therefore, that across the sector we are working towards providing a common simplified benefit statement that will help avoid confusion when employees can see all their pensions together for the first time online or via an app.
- Big data analysis that allows employers to personalise pension communications
Artificial Intelligence (AI) technology can be used to provide robo-advice pensions guidance based on factors such as people’s goals, attitude to risk, and how much they have saved. It’s an approach that could make financial advice more accessible – especially for those with smaller pension pots.
However, AI, or the automatic analysis of large data sets, is not just a good way to tailor online advice to people’s individual circumstances. It’s also an extremely useful tool for personalising pensions communications.
Timing is crucial to engagement with internal benefits communication of all kinds. That’s why a growing number of employers are using employee data to segment their communications and make sure the right people get the right messages at the right time.
Younger employees, for example, may find it hard to be stimulated into saving more for something 40 years away when they will need a retirement income. But they might well be more interested in what their investment is doing for social issues such as climate change. Ways to engage with them could therefore include sending out information about sustainable investments within the pension fund portfolio. If the fund invests in a solar farm in Africa, for example, telling its story would be a great way to capture the imagination of an environmentally aware employee.
[i] Retail banking market investigation, CMA, 2016
[ii] Technology and pensions, OECD, 2017
*This article was written for, and features in REBA, March 2020.