By Greer Flanagan, Actuary and Senior DC Consultant at Hymans Robertson
Here are the 10 key takeaways:
Set targets
One of the most common questions asked by members is “how much will I need in retirement?”. Helping your members set a target for income in retirement is one of the most helpful things you can do as an Employer. The PLSA have helped make this easy by introducing the Retirement Living Standards.
Tell your members how much they need to save
That first question is quickly followed up by “how much do I need to save to reach my target?”. Do you know how much your members need to pay in contributions to meet their required income in retirement? If so, tell them! If not, it may be worth finding out so you can help your members save enough. As my first guest, Anne Harris (Head of Pensions at ScottishPower) commented “If you don’t give people the information they need, they cannot make informed decisions about how much to pay into their pension”.
Take the fear away
Many members are scared to look at their pension. This could be for a number of reasons with the main two being a lack of understanding about what the number means, and fears that it won’t be enough to retire on. Help to remove that fear by giving your members the information they need – how much to save, and how much to aim for. Communicate well with your employees and be on hand to answer questions. Anne used member roadshows and optional one-to-one sessions to communicate these messages which were extremely well received.
‘Chunk’ pensions information
My behavioural science guest Jez Groom (Founder and CEO of Cowry Consulting) told me that giving members a whole load of complex information at once can lead to members disengaging. “Chunking” the information into easily digestible steps is a much better way to engage with members as it plays nicely into the “Homer Simpson” part of our brain which most of us will use on a daily basis. Doughnut anyone?
Use simple language
Guess what? People don’t use language like accumulation and decumulation in the ‘real’ world. Yes these terms make sense to us, we are engrossed in pensions. But to the average member this language means nothing. Removing jargon from spoken and written communication will really help members understand and ultimately allow them to make informed decisions about their pension.
Help people visualise their retirement
Behavioural science tells us that visual stimuli are extremely important. Therefore pictures and imagery that help members visualise their retirement can be helpful in engaging members. Very few people visualise their retirement as a line graph or a pie chart, yet in our industry these sort of visualisations are still used. Videos have become more popular in recent years but it could be worth thinking out of the box on this one – ask your members how they visualise their retirement and take your lead from them.
Personalisation
“The endowment effect” is the academic term for this. It describes how people tend to value items that they own more highly than they would if it did not belong to them. People tend to feel detached from their pension and will often refer to it as their “company” pension e.g. “my Hymans Robertson pension” rather than their own. Personalisation confirms ownership and helps members to place a higher value on their pension.
Help your members understand
My pension scheme member guest, Ying, highlighted the fact that she didn’t feel well informed about pensions and described her pension contributions going into a ‘black hole’. Simple, one-page guides on how pensions work could be helpful, but she also mentioned turning to YouTube to watch pension videos to help her understand – TikTok is another platform that has been mentioned. Do you need to turn to different communication mediums to ensure that you are engaging with all members in the way they like to be engaged with?
Encourage members to speak with an IFA – the sooner the better
This was a popular topic with my scheme member guests. Both Alison and my dad, Billy, highlighted the benefits of speaking with an IFA, commenting that the value gained from engaging an IFA far outweighs the cost associated. I often hear that members would like to use an IFA but don’t know which one to approach. Employers can help their members here by carrying out due diligence on a number of IFA firms and presenting a panel of firms for members to choose from.
Give your members the power to make good decisions
Education, communication, visuals, access to advice, personalisation… all will help to engage your members and encourage them to save more into their pension. Your members will feel empowered to make the best decisions allowing them to retire when they want to, with enough money to do so.
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