Measuring saver engagement: Could an engagement index be the way forward?
If I were to ascribe an overarching theme to ongoing efforts at pension reform, it would be ‘empowerment’. Or perhaps more precisely ‘agency’.
The consultation on the Value for Money framework – and other initiatives such as guided retirement or even the pot for life proposal – place considerable emphasis on putting savers in the driver's seat as a way of tackling pension inadequacy.
The challenge with this approach is that success is heavily contingent on engagement.
As things stand, the only nod to saver engagement in the latest Value for Money framework proposals – completing a nomination of beneficiary form – is a far cry from what we need to gauge engagement levels with any real accuracy.
What is engagement?
At face value, defining engagement seems simple. But what typical definitions often fail to recognise is that engagement looks very different to different people, depending on which stage of life they're in.
A 50-something employee's engagement is primarily financial. Retirement is just around the corner, so it matters to them to make sure their needs – and those of their loved ones – are taken care of when they stop working.
An early or mid-career employee, on the other hand, has other, more pressing concerns: getting on the property ladder, paying off their student loans, starting a family or launching a business, or sending their children to uni.
In the former case, completing a nomination of beneficiary form might reasonably form part of the engagement picture. In the latter case, when retirement is further down the line and not a top priority, it tells us nothing.
NatWest Cushon research shows younger savers engage through purpose. They want to know whether their investments are making a positive impact in the world. They also want to be able to check their retirement pot and make adjustments easily, from a smartphone app.
The lesson here is that engagement is about immediate relevance, not ticking boxes. The more a pension feels relevant now – whether because the employee is about to retire, or because they're making sure they invest in sustainable ventures – the more likely savers are to engage with it.
The case for a pensions engagement index
Once we understand that the key driver of pension engagement is immediate relevance, it's clearer why filling a nomination of beneficiary form – essentially an admin task – is a poor proxy.
Unless measurement accounts for engagement not having a single 'shape' – and accepts that how people engage with their pension changes over time – it can't be meaningful. Completing a nomination of beneficiary form fails on both counts.
So what's the solution, then? In my view, an engagement index would be a much better barometer.
Engagement Indexes – a single score built from a range of outcome-based behaviours – are commonplace in subscription-based businesses: from digital publishers to social media networks.
The Financial Times, for instance, use recency, frequency, and volume. In other words, they score engagement based on the number of days since a user’s last visit, how often they visited during that period, and how many pages of content they read.
Streaming service Netflix, on the other hand, scores engagement by working out total hours watched over a given period, divided by title runtime, while Meta uses likes, comments and shares.
Needless to say, a pensions engagement index would look different to these examples. Some of the criteria we could use to work out engagement include:
- How much savers contribute to their pension, whether this matches or exceeds legal minimum contributions, and how often they top up their pension pot or increase their recurring contributions;
- How often they review their pension arrangements, including using modelling tools;
- The average number of pension pots per saver over time and whether savers are consolidating them;
- The percentage of savers who are on track to meet their retirement targets;
- Fairness and inclusion indicators such as gender pension gap trends, and age, income, and demography-based disparities.
It's the core idea that's key.
Instead of measuring engagement arbitrarily – based on how many savers perform a task that might not even be relevant to them yet just for the sake of it – we'd measure it by looking at the behaviours they engage in that drive positive outcomes.
Engagement is about behaviour, not task completion
Despite around 90% of eligible employees being enrolled in a workplace pension, pensions adequacy – or perhaps, it’s better described as inadequacy – is a massive concern.
An Engagement Index could help to close the gap by enabling a broader, more dynamic view of how savers engage with their pension. One that captures which behaviours actually move the needle, so we can incentivise them.
Think of it this way. No personal trainer worth their fee would put together a bog-standard, one-size-fits-all plan and send their clients off without checking on their progress. Nor would they use metrics like time spent at the gym – or whether clients have bought a gym membership at all – as the key indicators of their plan's success.
It’s the same for pensions. We need appropriate engagement metrics to assess where people are at and make sure that providers are doing a good job at enabling behaviour that moves them closer to a better retirement.
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Supplied by REBA Associate Member, NatWest Cushon
NatWest Cushon is a workplace pensions and savings provider with an award-winning proposition.
