‘I am going to retire and live off my savings – what I’ll do the next day, I have no idea!’
This is a very old and mildly witty joke, but it resonates painfully for many of us in the pensions industry. There is no getting away from the fact that currently, a frighteningly large proportion of the UK population are destined to retire on a level of income that will forever be a challenge. Even more worrying is the fact that many people have no idea just how low their post-work income is likely to be.
Take this scenario: one of your pension members looks at their ‘close to retirement’ paperwork and concludes, ‘I think I can live on that’. Then the penny drops. The figure they are looking at is their total fund value, not their projected annual income. One of my colleagues recently experienced this exact situation. What followed was an emotional and tearful exchange with a devastated employee, trying to process the realisation that she will not be able to retire any time soon, if at all.
This highlights how workplace pensions can play a vital role in your employee wellbeing and reward offering. A high-quality scheme, which is well governed and effectively communicated can really set an employer apart. If you communicate your workplace pension as part of a broader financial education programme, even better.
The member in the example above joined her employer’s scheme at the first opportunity. She paid in the 3% needed for the maximum matching employer contribution, and read her paperwork. She had made a plan.
The problem is she joined too late – in her 40s, having returned to work after maternity leave with no pension in her early career. Nobody had highlighted that a 6% overall contribution is not enough for a decent retirement income. The paperwork received from her provider was too awful to comprehend. An all too familiar story. However, with auto-enrolment, ever-advancing technology and an increasing focus on financial wellbeing, we can easily change the narrative.
Effective communications really are vital. You could have the best scheme in the world, but it will only help you improve engagement and drive loyalty if your employees know about it and understand how it benefits them.
The good news is, many of the major pension providers are starting to harness the power of technology to transform how they communicate with members. A great example is Aviva’s ‘digital garage’. Delightfully hip and bearded, the place is full of technology geeks who don’t have three decades of old pension back-office dust on them. You can ask: ‘Alexa, how on track is my pension?’ Answer: ‘According to your recorded plans, you may only be able to afford one holiday abroad every two years if your pension growth and input carries on at the current rate. But why not increase your contributions etc…?’
Voice recognition, artificial intelligence, robo-advice and holographic imaging – let’s embrace the tech that can make pensions more accessible – and the sooner the better please!
This is the path to achieving ‘good member outcomes’. Get this stuff right and ensure that everyone knows where the goal posts are. Helping your employees navigate the labyrinth of pensions can only have a positive impact on their wellbeing, which in turn will boost engagement. Everyone’s a winner.
This article was first published with REBA on 8 November 2017.