Martin Parish, head of pension consulting at Aon Employee Benefits
Encouraging greater engagement with pensions is good for employers and employees. As well as highlighting the value of the pension benefit you provide, it can also lead to better retirement outcomes for employees. But, with a range of communication methods available to employers, determining which is most appropriate for your workforce isn't always easy.
Onsite or online?
Onsite communications such as presentations and seminars are one of the most effective ways of increasing engagement. For example, we've run seminars where as much as 70% of the employee attendees have subsequently increased their pension contribution. However, the downside is they're also the most expensive form of communication.
At the other end of the scale are online tools. These can include educational material but also interactive tools and modellers to help employees see how their choices can influence their future pension outcome. Low cost, and often provided free alongside a pension scheme, the downside is that sometimes, employees don't engage with this form of communication. Without regular encouragement to go online, login levels may be low.
Get the balance right
Understanding where online communication methods works best can help to drive greater engagement. For example, although it's a bit of a generalisation, we tend to see more employees aged 40 plus in seminars while younger employees are more likely to go online. There are several possible reasons for this. It could be that, with retirement more of a reality, older employees are more engaged with their pension, but it could also be that younger people are more comfortable accessing information online.
Whatever the reason, it does present a bit of a challenge for employers. Should they focus their attention on onsite or online communications? There's no simple answer but, with few firms able to afford a comprehensive onsite programme, online has to be the way forward. Online tools and modellers enable a highly personalised approach to pension planning that would be expensive to replicate onsite. But, to enable more employees to benefit from these, it's essential to take a more strategic approach to increase engagement with this form of communication.
The key to increasing engagement with online pensions material has to be greater tailoring of your communications. Sending out a blanket email inviting employees to log in and check their pension value is doomed when you consider the diversity of today's workforce. Segmentation is essential. To demonstrate, just think how differently a 60 year old and a 26 year old view their pension. While the 60 year old is likely to have built up a reasonable pension pot and be thinking about their retirement and how they access their money, the 26 year old is much more likely to be focused on how much they can afford to pay into their scheme. At that age, the prospect of retiring may not even register. Given these different views and objectives, these individuals need different communications around pensions. Sending the same messages will simply alienate one group and result in your emails ending up in the junk folder.
Understand your employees
To get this segmentation right, it's worth investing a bit of time and energy to help you understand your workforce and its engagement with pensions.
Focus groups can provide valuable insight. For example, we've found that clients with work councils or employee forums are much better at narrowing down their communications to different segments of the workforce.
Employee surveys can also be useful. There are plenty of tools available to help you run a survey but you could also ask an advisory firm to do it on your behalf. Also think about what you need to find out. As well as asking them how much they value their pension, include questions such as whether they've made any changes to their pension such as increasing contributions or switching investments, and whether they have any pensions that they invest in outside of the workplace. These types of questions help to gauge their understanding of pensions.
This insight can also be supplemented by data around online pensions activity. This could include details such as who has registered and which pages of your website are being accessed but also who has made changes to their plan such as increasing their contribution or switching out of the default fund.
Tailor your communications
Armed with this insight it's much easier to send out engaging communications. As an example, if 10% of your employees have switched out of the default fund, you can assume they have a reasonable understanding and engagement level. You could send them links to pension modellers and other tools to help them get even more out of their pension.
Conversely, with the 90% still in the default fund, it would be more appropriate to send them information about how fund performance affects the future value of their pension and details of their investment options. It may also highlight a need to rationalise your 200+ fund range, narrowing it down to 15 or so funds to make it less overwhelming.
Understanding your employees and tailoring communications to them is key to driving greater engagement with pensions. Doing this should increase the effectiveness of your communications and lead to better retirement outcomes for your employees.
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