Shakespeare and pensions
The UK pension industry is about to change. As Shakespeare said: “It is neither good nor bad but THINKING makes it so”. We have a crucial window for engaging members and helping them to think about their options, and this should be at the forefront of the minds of employers and trustees.
The new options available to defined contribution (DC) scheme members are a revolutionary step in the way that members gain access to their pension benefits. A DC pension scheme has now become The Most Tax Efficient Way to Save. Fullstop.
One of our recent Employee Insight reports revealed that before the Budget changes were announced ’42.3% of people felt they should be free to choose what to do with their pension pot at retirement’. The 2014 Budget changes are clearly responding to a perceived need, so it follows that it is vital for people to be made aware of the added freedom that is so quickly approaching in April 2015.
Historically, getting people to engage with their retirement benefits has been difficult up until the point of retirement. It was, and sometimes still is, often the case that lack of flexibility in pension products, lack of trust in the pension industry and complexity in jargon are being cited as the main barriers to engagement in pension saving. The 2014 Budget is an excellent opportunity for proactive employers and trustees to reengage their members with their retirement benefits (or to engage for the first time) and in turn can help to break down the historic barriers of engagement and encourage members to take a fresh look at their retirement savings.
It’s always been important for DC members to be well informed about their pension fund, as they have the ability to make investment decisions that may materially affect the value of their pension pot when they come to retire. They now have even more decisions to make.
Conversely, employers and trustees now have more information they need to communicate. Failure to do so could at best render members unable to make the right decisions, and at worse leave trustees exposed to risk, as Trustees and employers have a legal obligation to ensure members are well informed so they can get the best retirement outcomes.
If employers and trustees are asking employees to take a fresh look at their pension, then they should also take a fresh look at the way they communicate and engage them. We live in an age where there have never been more communication channels readily available, so in theory, communicating should be easier than ever. It is also true, however, that with the abundance of information consumed, messages risk being drowned out or ignored. It is therefore crucial that a mix of media is used appropriately to reach your audience and that the messages are relevant and engaging.
Analysing data to create clear groups within the membership underpins a successful engagement strategy. Creating an ’audience of one’ experience gives members that vital level of relevance in the information they are sent. If a 25 year old and a 55 year old receive the same message, via the same channel, how can it be relevant to both of them? Only by tailoring the message to show what their options are and how they are affected will members be able to relate to, and truly understand, their pension and the changes to it. At the end of the day, a change in legislation is only as valuable as people’s ability to take advantage of it, and this in turn is directly linked to the effort put into communicating the change. To return to Shakespeare; the changes are neither good, nor bad, but COMMUNICATION makes them so.
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