How to prepare for employees’ questions about pensions
Promoting long term savings in a positive light has always been high on the government’s agenda and has grown in prominence over the past year or so. The introduction of the DWP’s ‘Workie’ campaign in 2015, with the message ‘don’t ignore the workplace pension’ is a vivid example of the work they’ve started, but we’ve certainly still got some way to go in encouraging people to talk more openly about retirement savings. After all, the UK has continued to be criticised for its poor savings habits, with MP Rachel Reeve stating in a recent Independent article that Britain, more than most economies, is ‘terrible’ at saving. Not exactly the reputation we are after.
The good news is that in light of the various changes to pensions in recent years, the topic is much higher on employees’ agendas. Our own research found that three quarters of employees think people should talk about pensions and retirement planning more and nearly half are relying on their employer to keep informed. Employers play an important part in filling knowledge gaps and providing information on the options available to them, making it extremely important that they are prepared for answering any questions staff may have around pensions.
In terms of what questions these are likely to be, it obviously varies widely depending on individual circumstances. However, our research tells us that the majority would like to know the answer to the following:
- How much should I be contributing? – On average, people say they managed to save 9.5% of their salary last year but think they should have saved about 5% more than this**
- How should my money be invested? – Half of people (49%) with employer pension schemes have reviewed where their contributions have been invested in the last year**
- When can I retire? – Nearly half of UK employers are concerned about older workers deferring retirement due to inadequate retirement savings***
- How will I access my income once retired? – Nearly two thirds (62%) of individuals don’t know how the changes to pension legislation will affect them and will need guidance on the best option to take, whether it be drawdown, an annuity, and so on**
- What are my options around drawing down my pension? – Over a third of employees said they have a good level of understanding of the changes to pensions in 2015, yet 42% have done nothing as a result**
Most of these are not simple to answer and need serious thought as to how to empower individuals to feel they have all the information they need to make a decision that is right for them. Taking the following into account will ensure that employers can act as a go-to informant on workplace pensions, and encourage more people to think, and talk about, long term savings:
Get help from experts – It goes without saying that working with pension providers, who are better equipped to deal with the typical questions employees have around pensions and savings, can help take the pressure off of the employer. This is particularly relevant for organisations with smaller HR departments, and therefore less resource. There are many different ways this can work, depending on the business’s needs. For example, support can be provided to improve communications to members, or advice can be given to employees to enhance their understanding. At the other end of the spectrum, the whole arrangement can be fully or partly outsourced to a provider.
Focus on strong online support – Our research has suggested that employees are feeling confused about pensions and the options available to them. This can be eased by the introduction of online support, which will enable employees to find information about their current pension arrangements, what their organisation can offer them and whether this can match their savings expectations. It also ensures that employees can think about their pensions more regularly and aren’t just limited to once a year when pension flex choices may get locked down. Technology is the most effective way of encouraging this – and a lot of employees are using technology to review retirement plans and track retirement savings (Willis Towers Watson’s Global Benefits Attitudes Survey). Having access to this information anywhere, at any time, will help keep conversations and information around pensions fresh and up-to-date, rather than a rushed decision made in a short space of time before a window closes.
Engage with workers early on in their careers/when they join the company – Talking about pensions to employees who have just joined your company should be high on the agenda, particularly school-leavers and graduates. The more we promote pensions to younger age groups, the more embedded into future generations it will become. In terms of new joiners, aside from setting up a personal pension pot, others may want to boost their existing pension or merge different pots from existing pensions where possible, so employers need to start these conversations as soon as possible. More employees are expressing concerns that they will not have enough money to retire (as reported by the Joseph Rowntree Foundation), so this is extremely important.
** LifeSight Factor 55 research
*** Willis Towers Watson research