Engaging employees with pension savings after coronavirus

Dale Critchley looks at the challenge the financial services industry faces in helping employees to re-engage with their pensions.

As the response to coronavirus moves into a new phase, advisers, providers and employers have a task on their hands to re-emphasise the importance of future planning at a time when economic instability is likely to promote caution amongst individuals.

It’s not the easiest challenge to meet. Many of us have will have become accustomed to dealing with more short-term concerns, not least staying safe and well. And there’s no doubt that some people will need to remain focussed on patching up family finances. But all of us recognise that it’s important to encourage long-term thinking, too.

What can we do to help bring pension saving back into the foreground?

One factor in particular springs to mind – and it comes from the lockdown experience itself. Largely confined to our homes for much of the past few months, many people will have had a taste of what life after work might really be like. Spending time away from the workplace, but not going away on holiday... coping with reduced income security… facing greater reliance on the state or our own savings.

What would it be like to be furloughed permanently? The insights gained from this time could make some people more receptive to the need to plan for retirement – especially if our communications invite them to reflect on recent experience.

Are employees ready to engage?

The economic fall-out from lockdown and the impact on individual finances is encouraging many to reconsider retirement plans. One-in-ten mid-life workers aged 45-54 told us that the financial impact of coronavirus has caused them to delay their retirement plans, but for more than one-in-twenty the experience of lockdown has made them think about retiring earlier than they previously planned 1

It’s clear that for this demographic at least, immediate finances and retirement plans are interlinked, it’s also clear that for some people the current economic environment might mean that communication about simply paying more in isn’t inappropriate. Engagement with a pension scheme is much wider than this it may simply be about encouraging employees to take an active interest in where and how their money is invested – not just how much they put in.

It’s also important that employees value their pension scheme and trust it as a place they can grow their pension fund. Coronavirus gave us the opportunity to demonstrate the value of diversification within default funds, particularly for those close to retirement. By increasing awareness of the stabilising effect of diversification we can encourage inexperienced investors to take a more active interest in the way their pension money is invested and improve trust in the scheme. 

Opportunity for a rethink

Even though some subjects may need to be off limits for a while, engagement activity doesn’t need to be halted altogether. We’ve said that we can encourage employees to engage with their pension without necessarily impacting their monthly finances. As well as investment choice, consolidation could be a useful topic for communication. Think of all those people who will have tidied up the junk room, cleared the loft or sorted out a few drawers during lockdown. Their present mindset might be equally conducive to sorting out some old pensions.

The relevance factor: there’s no single coronavirus experience

Any communication about engagement with long term saving needs to be relevant to the recipient. Everyone’s experience of lockdown is different. Some will have been working from home, and may continue to do so, saving expenses including travel costs. Others will have had their pay cut or had their jobs placed on furlough. Households with self-employed members may have been impacted in many ways. Employers will be aware of what happened to their employees, but segmentation models may be useful to overlay the context of a household to improve levels of relevance.

It’s not just what we say, but also how we say it

The way we communicate our messaging is crucial – and once again, recent events have a bearing on how we might want to do this. With so many workplaces out of bounds, the march towards greater online communication has gathered pace still further.

Web-enablement means employees can either attend live events or catch up with their content at a time of their own choosing. As online meetings become the norm for many of us there’s a clear opportunity to deliver financial education in this way too.

Finally, it’s important to consider how our engagement strategies fit within the full picture of each employer’s communications – especially when difficult subjects are being broached. Everyone – advisers, trustees, employers and pension providers – needs to work closely together to produce communication plans which deliver coherent messages aimed at meeting clear objectives.

So yes, there are challenges to overcome if we’re to encourage pension engagement in these difficult times. But there are positives, and there’s a lot we can achieve if we’re all moving in the same direction.

Dale Critchley, Policy Manager for Workplace Savings and Retirement, is an expert commentator with over 30 years’ experience in a variety of roles within the workplace benefits market. He is an Aviva spokesperson specialising in issues relating to workplace pensions and is regularly featured in the media.

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