Time to change

01 February 2019

This article was featured in the February 2019 issue of the magazine.

Johanna Nelson, associate director, Communications, Punter Southall Aspire, discusses pension communications research findings and recommends solutions

Delivering communications that encourage people to save more into their pensions is a perpetual challenge for UK employers, but new research – It’s time to change from Punter Southall Aspire (https://bit.ly/2LEaWku) – offers fresh insight into how companies can transform and optimise their pension communications. The research found four major issues affecting pension savings which employers need to address to develop an effective pension communications strategy. 

  • Now matters more than then – People are more concerned with their current finances than looking to the future and many have competing financial pressures. Half are paying off a loan or credit card, 30% regularly use an overdraft facility, and 45% have dependents to support financially. 

The need for instant gratification also has an influence: 88% would rather have £400 now over the chance of £800 in the future and 66% would be more likely to respond to communications that referred to ‘now’ rather than the future. 

The fact people are more concerned with the present than the future is something employers can tap into. One solution is to provide financial education and communications focused on matters currently concerning employees, such as debt management or budgeting. This is a route for talking about the positive benefits of long-term pensions savings.

  • Anxious about their financial future – Some are burying their heads in the sand when it comes to saving for retirement. Nearly half (46%) say their biggest fear is not having enough money in retirement, but almost a third (30%) admitted retirement isn’t part of their current financial planning; and 66% said they don’t know if they are saving enough for retirement. 

One reason is that 78% of people are on short-term budgets, budgeting monthly rather than looking further ahead; with only 28% sticking to their budgets. People are ‘burying their head in the sand’, ignoring their financial future, and focussing on their immediate needs and wants. 

Many simply don’t know how to financially prepare and are looking to their employer for proactive guidance on this. Communication strategies focused on financial education and budgeting for both now and the future can help, as will providing tools and technology that helps employees to feel more confident about managing their finances long-term. 

  • Apathy about pensions is widespread – Nearly one in five of those aged 16 to 24 had no idea if they have a pension; and 30% said they don’t think pensions are important. Almost a third (32%) couldn’t remember their contribution rate. The reason for this widespread apathy could be that three in four say they are optimists and believe their retirement will be fine, despite their inaction.

This apathy, fuelled with optimism bias, reinforces the need for pension communications that can improve active decision-making from members and encourage more pension engagement. 

Relevant messaging (based on members’ behaviours) will make communications more meaningful to the member, and thus more likely to stimulate activity.  This is where data and technology are crucial, where digital processes can recognise member trigger points and send out relevant messages.

When it comes to messaging and tackling naive optimism it’s important that companies don’t build campaigns around the risk of future issues.  Instead, they should focus on the positive benefits of saving more and making active decisions.  λ Better pension communications – Employers need to do more to guide and support their workforce: 82% want their employer to guide them in a positive direction about pensions; 72% want to be educated about planning for the future; and 68% would like their employer to keep reminding them to review their pension, even if they don’t respond to the communications.

But traditional communication tactics need an overhaul. Only 38% will respond to scare tactics that are commonly used in pension communications, but 76% would react to exciting messages. This highlights the need for positive and relevant messaging emphasising the benefits of saving more. Respondents said that the best ways to capture their attention with marketing and communications materials would be with ‘powerful imagery’, ‘humour’, ‘moving words’ and ‘colour’.

Many companies still rely on their pension provider to undertake the pension communication role, but our research highlights that the employer is an essential and influential voice for employees when it comes to pension decision-making. In fact, employers are often more influential than official advisers, family, colleagues and friends – so it’s vital they take their role seriously. 

Many employers feel they have a duty of care to help ensure employees have a financially secure retirement. They are in a strong position to make this happen, by providing financial education and guidance on current and future financial issues through positive communications to encourage a savings culture. 

Technology also plays an important role and tools such as financial dashboards can help employees become more engaged with improving their financial wellbeing and with pensions and savings.