David Perkins of HSF on why focusing on pension outcomes can drive financial wellbeing engagement
Auto-enrolment has been hugely successful and led to a dramatic increase in pension scheme membership. However, there’s an ongoing issue around outcomes for pension savers. It’s one thing to get people into a pension scheme, but now we’re trying to find more effective ways of getting people to engage with what their potential outcomes might be.
The Living Wage Foundation approached HSF to be part of its pilot scheme for the Living Pension. This is an initiative – similar to the Real Living Wage – that employers can commit to and offer a level of pension contributions that aims to provide a certain standard of living in retirement.
The commitment is to provide a total pension contribution of 12% of which at least 7% should be from the employer, with the contributions based on total earnings. This contrasts with auto-enrolment where employers are required to contribute just 3%, based on qualifying earnings.
Being a Living Pension employer
There are two reasons why we decided to commit to the Living Pension. Firstly, it aligns with our values and commitment to wellbeing, including a commitment to financial security for employees. Secondly, the Living Pension promotes a meaningful savings target that people can engage with and this makes sense to us as a business.
We know from our own modelling that this initiative will result in better outcomes at retirement for a large number of people, which in itself is excellent.
But more than that, it’s going to change the way in which people engage with our pension scheme and what it offers. So it’s about engagement levels, rather than just numbers.
Engaging employees with their pension
We’ve been working closely with our pension advisors to understand what potential outcomes are going to look like for our employee population. Taking age as an example, we know that the youngest employees can be difficult to engage with their pension, but we also know that one of the biggest impacts in terms of someone’s pension outcome is joining the scheme as early as possible in their career.
Since we introduced the Living Pension, we’ve already had feedback from people in their 20s saying it has got them thinking about the decisions that they make now and what that might mean in terms of long-term financial security.
By using our data, we’re able to bring to life what employees’ contributions mean, in terms of long-term outcome, and that’s really helping to further engage people with their pension.
