This public needs ‘to fall in love with pensions again’
Guy Opperman, the minister for pensions and financial inclusion,stated this week that the government and the industry “need to work in partnership” to enable savers to take control of their future. He also claimed that British people need “to fall in love with pensions, savings and investments again,” and “grasp clearly” the need to save for retirement. But is this easier said than done?
Opperman outlined four priorities to ensure customers are engaged with their finances this year, including delivering greater engagement with pension savings and automatic enrolment (AE), developing a “properly safeguarded” pensions dashboard by 2019, tackling pension scammers, and improving advice and guidance through a single financial guidance body.
Although Steve Butler CEO of Punter Southall Aspire, a workplace pensions and savings company, has welcomed the minister’s views, he says that pensions engagement is a major issue for UK companies currently and a tough nut to crack.
Butler says, “I am constantly speaking to CEOs who can’t get employees interested in pensions, a situation that clearly needs to change. Just this week I read a survey from the Royal Society of Arts which claimed that economic insecurity has become the “new normal” in the UK, with 70% of UK workers claiming they were “chronically broke.”
“This brought home the urgent need for more financial education both in schools and in the workplace and the fact that communications about workplace pensions and savings isn’t working, it needs a radical rethink.”
“While greater numbers of employees now have a workplace pension thanks to auto enrolment, many aren’t saving enough. When the minimum contribution required for qualified schemes rises on 6 April there is big risk that many will opt out, making the communication challenge even tougher.”
Butler adds, “Most companies simply aren’t approaching pensions communication in the right way and mistakenly believe that simply telling people to save more will change their behaviour – it won’t.”
To solve the pensions engagement issue, Punter Southall Aspire advocates a five-step model that will result in behavioural change and improve engagement. The five steps are the psychological processes that people need to go through before they make a big change.
- Precontemplation – the first stage when people are unaware they need to make a change
- Contemplation – people are planning to make a behavioural change
- Preparation – people have an intention to act
According to Butler, “To improve pensions communication and engagement, employers need to communicate in different ways at every stage. At the precontemplation stage it’s about awareness, at the contemplation stage it’s education, during the preparation stage people need support in decision making, for action they will need a vehicle for delivery and finally, maintenance will be all about continued engagement.”
He says that in the early stages, presentations, financial education events and one to one sessions and coaching, along with easy to understand, jargon free literature will all build awareness.
He adds, “Once people sign up, digital tools and online dashboards, regular news, tailored content and video can help people understand and visualise their retirement savings. Showing people how their savings are growing and what kind of future this will give them can mean people are compelled to save more.”
Together these methods will help employees better understand their pensions and change their savings behaviour to help them plan for a more comfortable retirement.
Punter Southall Aspire recently launched Next Generation Savings – a new approach to workplace savings and pensions which includes an online savings portal, digital tools and financial education as well as the five-step model to help employers transform their workforce savings culture. For more information visit www.psaspire.com