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15 Jul 2019

10 ways to encourage all of your employees to become engaged with their retirement savings

It’s in everyone’s interest for employees to stay tuned-in to their workplace pension schemes. Engaged scheme members are motivated to perform well, less likely to suffer financial stress and more likely to be able to afford to retire at the time that’s right for themselves and their employer. 

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However, for a large number of employees, the subject of workplace pensions is either shrouded in mystery or clouded by worry. Aviva’s Savers vs Spenders research found that almost a third of people (31%) don’t know how much they have saved in their pension pots and 49% think they need to be saving more.

So what can we do to encourage all employees – not just the more financially aware – to become engaged with their retirement savings?

10 tips to help turn employees onto their pensions

1. Get them on board from the outset

Workplace pensions need to feature strongly during induction processes, and detailed information should be provided when an employee starts their job. This should include a ‘pension pack’ – in printed or online format – that sets everything out in plain, jargon-free language and clearly directs employees to more information and support.

2. Tell them about it, then tell them again

To keep employees switched onto the benefits their workplace scheme offers, they need to be reminded of the facts on a regular basis. Employers might well need to tell employees what they are going to tell them, then actually tell them, and then tell them again for good measure. And they might consider using different media to let them know about it.

3. Make sure the timings are right

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.

Even the most committed of providers couldn’t pretend that pensions are the most interesting thing your employees will read about all year – and some months bring more distractions than others. Avoid August, when they’re more likely to be concentrating on having fun than choosing funds. And for many, December is obviously the time when long-term thinking tends to take a festive break.

4. Host financial education seminars

This is about far more than helping employees to understand the nuts and bolts of their scheme. By looking at their finances holistically, many employees come to realise that they need to take a more ‘hands on’ approach to their retirement planning. It’s all too easy to think that auto-enrolment will take care of everything, rather than considering how much is actually needed to fund a good lifestyle after work. Pension providers and other professionals should be able to help you stage informative seminars and events.

5. Adopt online pensions calculation tools

Users of pension calculators say that when they can see the impact of cutting back on their total pension pot, the penny really does drop. There are lots of easy-to-use online calculators that can help your staff get an idea how much they might have in their pension pot when they retire – and how saving a relatively small additional amount could make a big difference down the line.

6. Make your scheme stand out

Every employer will now provide a pension scheme in line with the same set of minimum criteria. So whereas once a pension scheme could be seen as a benefit that helps to retain good staff, it isn’t so simple anymore.

Paying in above the minimum levels is one way to set your pension scheme apart from other employers. Other factors, such as online account access (perhaps alongside other savings products under a corporate platform), can also set your scheme apart.

7. Make sure employees know about the downside of opting out

You might have employees telling themselves that they’re only opting out for a short time, while they address more pressing financial needs. But because of the effects of compounding, this tactic could be more costly than they think – especially for younger employees who would be missing out on many years of potential growth for the contributions they may have decided to ‘save’ to spend on other shorter term priorities.

8. Remember different age groups respond to different tactics

Not all your employees are at the same life stage, and nor do they all have the same priorities or attitude to risk:

  • Younger employees are more likely to be receptive to financial education. However, retirement is a long way away, so it’s important to communicate the value of getting into the habit of saving in general. Emphasise that their pension scheme is part of their reward package, and that you make contributions as well as themselves – no-one wants to turn down ‘free money’.
  • Employees aged 30 to 50 are likely to be juggling some very immediate demands on their finances – from mortgages to family commitments. Your communications need to recognise this, with guidance on pensions positioned as a part of general support to help them make the most of their money.
  • Older employees will be more aware of the need to plan for retirement, and are likely to be concerned about the effect of volatility on their pension pots at this later stage. Encourage them to think about their choices at age 55+, and at the same time highlight the opportunity they still have to make changes to their investments or level of contributions. To make this work, of course, your scheme will have to offer the flexibility to accommodate their choices.

9. Appeal to employees’ self interest

Sometimes, telling employees a few straight facts is the best way to get them to engage more fully with their pension. Remind them that:

  • Employers put money in on their behalf. If they aren’t in the scheme, they won’t get the extra money.
  • It’s the employee’s money, not the employer’s. What goes in is theirs, what comes out is theirs. Currently, from age 55 they can take a quarter of it as a tax-free lump sum to spend as they like.
  • Their savings get a 25% top-up from tax relief. If they are basic rate taxpayers, for every £80 they save in the workplace pension, £20 is added from tax relief. That’s an instant increase of 25%.

10. Remind them what the state pension pays

Finally…the full state pension currently pays £168.60 per week – and that depends on having a full National Insurance record. Would they want to live on that?

This article was provided by Aviva.

In partnership with Aviva

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