How to change workforce savings culture

12 February 2018

This article was featured in the March 2018 issue of the magazine.

Steve Butler, chief executive officer at Punter Southall Aspire, sets out five steps to modify employee behaviour

This year many employers will be looking at how to improve their employee engagement and communication around pensions and retirement savings. With 6 April heralding a rise in the minimum contribution required for qualified schemes, the risk of employees opting out of their schemes will increase, making the challenge even harder. 

This could mean for example, if contributions are based on qualifying earnings, these will increase from their current level of 2% to 5%. Employers will pay a 2% minimum, with the remainder being paid by the employee.

Currently, employees only need to pay 1%, so this change represents a notable increase in their contributions. This minimum rises again on to 8% on 6 April 2019. Employers will pay a 3% minimum and employees the remainder.

While many employees understand that every extra penny paid into their pension will serve them well in the future, for those who see retirement as a long way off, this could be viewed as a cut in their take-home pay. 


Reducing risk of opting out

Employers can play an important role in changing people’s views of saving for retirement, but we all know that changing behaviour can be easier said than done. 

Employees will need to understand what changes are being introduced and be persuaded of the long-term benefits of not opting out. One way to do this is to help them visualise what their retirement will be like if they fail to save enough and only make the minimum contributions. 

Equally, illustrating what a difference small increases in savings could make to the home they live in, the car they drive and where they go on holidays can be a good solution.

According to research from Which? ( couples will need to save £131 each month from the age of twenty to enjoy a comfortable retirement. Those who leave it until they are fifty would need to put away £633 a month – a massive £500 difference. 

However, getting people to take money out of their pocket today to benefit them in twenty, thirty of forty years’ time presents a significant challenge to overall employee engagement strategies and takes even deeper persuasion techniques.

Companies often make the mistake of thinking that getting people to save more is just a question of notifying them of their options, rather than addressing the complex problem of changing deep-seated behaviours. Some even mistakenly believe that a short reference to the legislation in the March newsletter will be sufficient.

For some companies changing behaviour can seem like a mammoth task – one that many may well end up avoiding. But it doesn’t have to be that way. We advocate a five-step model ( to change employees’ behaviour and improve their engagement. them visualise what their retirement will be like if they fail to save enough...


Five steps to behavioural change

Our model focuses on the psychological processes people will go through before they will change their attitude and behaviour. It is a bit like buying a car – it is a big investment and can’t be decided overnight.

The first stage is precontemplation, when people are unaware they need to make a change. Next, there is contemplation, when people are planning to make a behavioural change; and then there is preparation, where people have a firm intention to act. The final stages are action and then maintenance – often the biggest challenge as this stage maintains and supports the actions. 

At each stage different methods of communication can be used. These range from face to face events and presentations, digital tools that can help people understand and visualise their retirement savings, through to financial education and online saving dashboards. 

In the precontemplation and contemplation stages, financial education and face to face presentations work well to educate people about pensions and the importance of savings whereas digital tools and dashboards are fantastic ways to help people track their savings and how this will impact their retirement. 

All these different communication methods will help employees to better understand their pensions and change their savings behaviour to plan for a more comfortable retirement. 

Encouraging behavioural change, then putting it in the context of employees’ day-to-day lives will challenge the current status quo in terms of pension and savings engagement. This could mean that 2018 is the year when companies get their workforce excited about pensions.