How to spark interest in pensions among the workforce

What more can employers do to get employees to engage with their pensions?

Regular contributions to a workplace or personal pension are the best way to achieve financial security once you’ve finished work.

The number of people making individual contributions to a personal pension decreased to 6.8 million in 2022 to 2023 compared to 7.4 million in 2021 to 2022 according to July’s government statistics.

Despite their importance, it’s notoriously difficult to get employees to engage with their pensions.

Pensions can feel too far away

For many employees, claiming their pension feels too far into the future for them to think about, especially since the retirement age in the UK is set to rise to 67 in 2026.

When you’re raising children, paying your household bills and rent or a mortgage often take priority ahead of pension contributions.

But it’s your partner, your children and your mortgage you need to think about before you stop your pension contributions.

As an employer, it’s important to remind employees the money they put into their pension is never wasted, especially if they die before they retire.

If the worst does happen to you before retirement, your pension pot could be paid out as either a lump sum or a pension to your loved ones.

This will help them to pay for everything they need after you’re gone and avoid the added difficulty of financial hardship after a bereavement.

Traditionally, membership of your employer’s pension scheme led to eligibility for a higher death-in-service lump sum (life assurance) benefit too, ratcheting up the value of paying into a pension.

Pensions can seem hard to picture

Numeracy levels in the UK are lower than you might think.

According to research from charity National Numeracy, more than half of the UK is judged to have low numeracy skills and 45% have numeracy skills at a similar level expected of a primary school child.

The same research found twice as many women felt anxious using maths skills compared to men.

Your employees may fall into these categories and have difficulty engaging with and understanding a statistic telling them how much their pension is worth.

Give employees numbers about their benefits (including pensions) in context.

Help them picture what the benefits they’ve built up will get them.

Tools such as the Pensions and Lifetime Savings Association’s (PLSA) retirement living standards are excellent for this, demonstrating the money individuals and couples need in retirement for a minimum, moderate and comfortable standard of living.

Currently, it estimates that a couple would need £43,100 a year for a moderate retirement.

Pensions can sound scary

Employees are often either unwilling or unable to engage with their pensions because the communications they receive about their benefits aren’t fit for purpose.

Offering a scheme member information about a ‘summary funding statement’ or ‘transfer values’ is important.

But if industry terms aren’t explained to members and they don’t understand what you’re telling them, they’re far less likely to take important actions like updating their expression of wish form.

To avoid this, make sure your pensions communications are clear, to the point and as jargon-free as possible.

While pension trustees are legally required to issue things like summary funding statements to members, that doesn’t mean they have to be inaccessible or unhelpful.

Only use technical language where necessary and consider including a ‘frequently asked questions’ section to explain complex sections to members.

Accessible to all

You should also consider how your pensions communications are presented. To make them accessible to all members, consider using bitesize videos to explain benefits alongside more traditional statements and newsletters.

While it’s difficult to get employees to engage with their pension, most just want to know their benefits are secure and they’ll be able to access them when they need to.

Consider a multi-media approach. If you need employees to take action around their pension, make sure the ‘when’ and ‘how’ is clear.

Give them plenty of time to act – don’t spring it on them.

Importantly, combining all of this, you’ll get not just employees who engage with their pension, but also scheme members who better understand and value it.