It’s now becoming a cliché to write that people aren’t engaged with their pensions, or that members don’t feel connected to their pensions. However, as with all cliches, there is an element of truth – Aon’s DC pension and financial wellbeing employee research 2021 shows that 71% of the people surveyed have not set a goal for how much they need to save before they can retire, and 87% are expecting a shortfall in retirement income.
So why are people not engaged with their pensions – the key source of income that will provide for them once they have finished their working lives? Here are some of the typical responses from members:
How has the industry responded to improving member engagement?
Pension providers have responded by developing and/or revamping ‘tools’ including pension apps, modelling-tools, ‘micro-sites’, personalised videos and video annual benefit statements, to name just a few. Pension providers in the UK have also responded by offering more pension investment choices (outside of the default option) or lower charges to make their proposition more competitive.
A Pension Paradox
The pension industry’s response seems to have created a pension paradox. We understand member engagement with pensions is low – we know possible reasons for low member engagement – pension providers have developed solutions/tools in response – but member engagement is still just as low!
Missing piece to the puzzle to drive engagement with pensions – Target
We believe the pension paradox exists because there is a missing piece to this jigsaw – a Target. The reason why members don’t engage with their pension is because, while members are given access to a host of ‘pension tools’ from their pension provider, none of them explicitly help members to set a target for their retirement, especially in a way which resonates with them.
According to a survey by the Pensions and Lifetime Savings Association (PLSA), 70% of savers say that targets would help them save more. By target, we mean a target retirement income level. Take the PLSA’s Retirement Living Standards: pitched at three levels, this can guide members to target precisely what their retirement could look like (and retirement costs). Help members set a target, via financial wellbeing workshops and sessions, and make the pension target really personal, and member engagement could suddenly look very different. This can also help members see if they are on track to live the retirement they envisage, and if not, what they can do ‘now’ to bring them back on track.
Although the responsibility lies with the employee, there’s still a big role employers can play to help employees achieve a retirement worth having – and as pension specialists we’re here to help.
Do you need help with your pension engagement from pension specialists?
To find out more about how the team of pension specialists at Growth Partners can help you with your pension member engagement, please feel free to get in touch with us today.
You can’t hit a target you cannot see, and you cannot see a target you do not have – Zig Ziglar.