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Opinion Soapbox
NEIL HAWKINS
Modernising the pension message In the UK, employers contribute over £75bn each year into pension schemes – over 5% of GDP. With the introduction of auto-enrolment, this is only set to increase. But despite the size of the industry, are employees engaging with the opportunities they’re being offered? Are the majority just doing the bare minimum while the pension gap widens? To address these issues, the world of workplace benefits is evolving and now offers a lot more than just pensions. Many employees have access to more flexible ‘platform’ packages which they can tailor to their specific needs and attitudes to saving. Driving these developments is the changing workplace, new and emerging technologies and, to a large extent, regulation. Autoenrolment hasn’t just changed the rules and started bringing more workers into pension schemes; it’s also led employers to revisit their workplace benefits provisions. In doing so, many have realised a ‘one size fits all’ solution is no longer enough.
Platform alterations Employees have differing needs and attitudes towards saving. So the flexibility of corporate platforms – offering pensions, ISAs and other investment options through one online service – puts them at the forefront of developments. Online services are also ideal for hosting helpful tools, financial education and other information. The aim of platforms is to give people a consolidated view of their planning and an easy way to monitor and manage their savings. However, flexible new schemes and swathes of newly enrolled members don’t guarantee success. Taking auto-enrolment as an example, how many employees will pay in more than the minimum required? Unless members focus on their retirement planning, few are likely to take that extra step. To turn this around, the industry needs to maximise its engagement efforts. The best ways are through clear communication and helping people follow up on their intentions. Using techniques developed in behavioural finance, we are starting to see schemes adopting the ‘save more tomorrow’ approach where, when their employees join a scheme, they can sign up to automatic future increases in their contribution
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Neil Hawkins says embracing modern solutions is the best way for the pensions industry to engage employees with their workplace benefits levels. These increases will usually tie in with pay rises, making sure members stick to their good intentions and don’t use the extra money for short-term temptations when the time comes. Whatever a scheme’s benefits, good communication will be key in building the employee engagement needed for a successful benefits package. Traditional pension literature has been a mixed bag, sometimes clear and concise, often complex and impenetrable. But even with well-produced material, how many people take the time to read it?
Online engagement Some pension schemes have made big steps online, finding fresh ways to present information and providing tools and other material to bring the details to life. Online services are convenient too, but research shows that in financial planning what people really want is someone to talk to. That said, market researchers Mintel found only 17% of people would seek advice from a financial adviser. They are perceived as experts, but expensive – 40% of those surveyed prefer to discuss things with friends and family, and much of this interaction takes place online. Pensions tend to have limited audience appeal, but the popularity of these sites could be a way to capture hearts and minds. Across all
sectors, people use social media to research products through consumer websites and social networks. Consumers feel they are communicating with people they trust – their friends, families and online peers. In the workplace benefits market, online pension scheme communities can help overcome many hurdles. Pensions often instil fear but social media lets people ask questions without feeling stupid. Discussion forums, financial education and webinars can all build knowledge, confidence, engage people with their scheme and help them make financial decisions. Of course, there’s little point using social media solely because it’s in vogue. Providers can give information but not advice, and the risks of following ‘advice’ from a non-qualified person are obvious. Pension scheme moves into social media are understandably being made with caution. They need to be relevant, continually updated, and carefully monitored. But pensions are a pressing concern, and it’s only by offering a modern solution to this modern problem that employers and providers can truly engage with scheme members.
“Good communication will be key in building the employee engagement needed for a successful benefits package”
Neil Hawkins is financial education director at Friends Life
THE ACTUARY • November 2013 www.theactuary.com
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25/10/2013 17:22
