Pensions, financial wellbeing and employee resilience: the top challenges for 2022

Engagment will be the overarching challenge for 2022. If you include pension spend, benefit provision is a big number on the profit and loss statement and so you need to ensure you’re getting some value, which translates to engagement. If employees aren’t engaged with their benefits, then there’s no point in providing them.

Clearly some benefits are either compulsory or simply hygiene factors, so ditching them is not an option, but that doesn’t mean you need to accept low levels of engagement – you need to fix them.

Pensions – the biggest challenge

Pensions are the most expensive benefit in the mix, but arguably the least engaging, especially among younger employees. It’s often argued that high take-up rates show this isn’t true. But pension membership rates are high because employees are automatically enroled; they don’t have to actually do anything.

But at least it gets people into pensions. But what it doesn’t do, once they’re in, is get them engaged and this is critical if pensions are to serve their purpose, which is to provide good retirement outcomes. Although pension membership levels have never been higher, contribution levels are low and hover around the auto-enrolment minimum levels.

Basically, people are saving into pensions, but not enough. And the problem with automatic joining is that appreciation levels are low and without engagement the employer pension contribution may as well be another tax line rather than a benefit line.

So, how do you increase engagement levels?

1. Look at your communications

This doesn’t mean communicate more. The problem mostly is that for a lot of people, pensions mean complexity, jargon and negative messaging.

We need to simplify pensions and make the messaging more positive and aspirational. The standard advert of an elderly couple sitting on deck chairs is hardly going to motivate a 25-year-old to get engaged in any meaningful way. Worse still is the message that if you don’t put more into your pension, you’re going to be living out your later years in abject poverty. This creates a feeling of being defeated before you’ve even started.

We need to talk about pensions in the context of wider finances; pensions can’t just be about getting old.

2. Instant gratification is not a bad thing

Getting into the habit of saving is hard enough, but saving for a goal 30 or even 40 years away is just not meaningful or exciting for younger employees.

Now that might be the nature of long-term savings, but it doesn’t mean there can’t be immediate benefits along the way. It just takes some out-of-the-box thinking.

For instance, research tells us that one of the biggest concerns for younger people is the environment. And pensions, with trillions of pounds in investments, can play a big part in fighting environmental issues such as climate change.

Making sure that your workplace pension is helping tackle climate change is a message that will resonate loudly with all employees, but especially younger ones. It’s a lot more attention grabbing than any messaging around retirement.

3. Go digital

If it’s paper based, it’s old fashioned. This is generally going to be the view of younger employees, but sadly it’s still the reality for a lot of pension providers.

People want to be able to access and manage their pensions in the way that they manage most other things: through a mobile app. Great messaging and exciting propositional stuff is going to lose its impact unless it’s delivered digitally.

Financial wellbeing – the late arrival

Although wellbeing has been a high HR agenda item for a relatively long time, one of the most critical parts, financial wellbeing, has only really found traction during the pandemic.

In general, people don’t have enough in accessible savings to see them a tough financial period. And with the recent increase to interest rates, money worries are on the rise.

For a business, money worries spell trouble in terms of employee performance levels. Our own research shows that money worries negatively affect performance at work for three out of five employees. It increases absenteeism and presenteeism, neither of which great for productivity.

What has become clear with the Omicron variant, is that Covid-19 is going to be around for a lot longer than any of us thought and so is the challenge of getting employees financially resilient.

So, as an employer, what can you do?

1. Help employees help themselves

As I mentioned earlier, getting started with savings is not easy and so we need to make it easy. And the workplace has a big part to play.

Employees intrinsically trust their employer and will straight away feel a workplace savings scheme is a safe choice. They don’t need to go through the provider or product selection process themselves and read through endless terms and conditions – the employer has already done this for them.

Also, allowing saving to be made through pay means that employees don’t have to worry about setting up direct debits or other payment methods.

2. Make it safe

It’s important that employees feel they can talk to you about their money worries and seek support without it affecting their position. Surfacing worries means they can be dealt with, and that means less impact on productivity levels. The more support that you can give people both in terms of benefits and resources, the safer employees begin to feel.

Employee resilience – an opportunity to look at the overall benefit mix

As we all appreciate, people are a company’s biggest asset, but only when they are performing at their best and that’s about keeping them healthy physically and mentally.

Employees need to be supported and have resources to help them to become more resilient. Clearly, this should all form part of an overall wellbeing programme, but it also requires a rethink about the benefit mix.

Do you have an employee assistance programme that offers counselling services? With increased pressure on the NHS, do employees have access to private medical insurance that offers faster treatment and access to psychological support services?

The world has changed over the past two years and some of these changes are permanent. The benefits mix needs to reflect this reality so it remains relevant; that is the key to engagement.

The author is Steve Watson, head of proposition at Cushon.

This article is provided by Cushon.