Employers must be more open about pension savings, say workers

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HR should focus on transparency, training and tools when communicating pensions to employees, as new research released during Pension Awareness Week shows employee engagement with pensions continues to be a challenge

Employers must be more open with their workforce about pensions, as engagement efforts around saving for retirement continue to fall short, according to Atlas Master Trust.

Its research, which surveyed 200 pensions managers, 200 senior finance professionals, 100 senior HR professionals and more than 2,000 employees, found that the vast majority (96%) of UK employees believe employers need to be more transparent about pension shortfalls and the realities of retirement today. More than two-thirds (68%) said their employer could do more to encourage them to maximise their pension contributions.

HR leaders supported these concerns, with 90% agreeing that they need to be more transparent about savings shortfalls in their pension communications, and only 39% citing being very satisfied with their engagement efforts.

Engaging employees with pensions is an ongoing challenge, with almost three-quarters (72%) of employees admitting they are not actively engaged with their workplace pension, and more than a quarter (28%) saying they never review their pension and try not to think about it at all. Only 6% consider themselves to be very engaged with their pension, regularly reviewing it and considering their investment options.

This lack of engagement is leaving employees in the dark when it comes to important savings choices, the survey showed, with more than three-quarters (77%) of employees saying they don’t understand enough about pensions to make considered decisions.

Alarmingly, the majority (60%) of employees believe that minimum contribution levels for auto-enrolment workplace pension schemes represent the amount that the government recommends to achieve enough retirement income.

Minimum contribution levels rose from 5% to 8% in April, of which the employer must pay at least 3%. However, the Pensions and Lifetime Savings Association (PLSA) has previously warned that the minimum level should be raised to 12% between 2025 and 2030 if workers are to save enough to be financially secure in retirement.

Roz Watson, head of engagement at Atlas Master Trust, said that employers need to take a different approach to engaging their workforces around pensions “based around the ‘Three Ts’ – transparency, training and tools”.

“There needs to be a clear separation between engagement and member communications. Too many employers are focusing their engagement efforts on increasing visits to a website or downloads of an app. Real engagement is about driving genuine awareness and knowledge of pensions; empowering members to make proactive and informed decisions and to understand the implications of these decisions,” she said.

Employers seem to be conscious of their role in engaging employees with pensions, with 91% of HR and finance leaders and 93% of pensions professionals surveyed acknowledging that employers have a responsibility to provide more financial education to employees.

Speaking to HR magazine, Watson said that HR should employ different communication techniques to better engage the workforce.

"At the moment a lot of member engagement is too generic and too complicated. Pensions are easy for us in the industry to understand, but not always for everyone else," she said.

"Adopting a different approach can help members to become more engaged. They need easy-to-understand, bite-sized communications, personalised and segmented as much as possible. Nudge communications also help to remind employees to check in regularly with their pension. A face-to-face chat about the pension when someone joins the company, a short webinar or video showing members how their pension account works and how they get online to make changes and increase their contribution, a visit from the pension provider at a benefits fair – these can all help inform and educate the workforce."

Watson added that HR will also have a role to play in engaging the workforce with the upcoming pensions dashboards, which will help employees "build up a more accurate picture of their retirement".

"HR will have an opportunity to help employees to fully engage with their pension. They can hold training sessions or issue short videos on how the dashboards work, and continue to build on their existing communication plans to encourage employees to pay attention to their pension. Saving for life after work should become as important a benefit – and a requirement – as any pay, bonus or holiday allowance," she said.

This comes as separate research from Aegon pointed to a rise in confidence among the UK workforce over being able to retire comfortably, with 52% of workers feeling this way up from 48% in 2017.

However, the Retirement Confidence Survey suggested this confidence is premature, with many employees unaware of how much they have saved. A quarter (25%) of those with pension savings said they don’t know how much they hold in pensions, rising to 30% among 35- to 54-year-olds. While this stood at just 19% of 55- to 64-year-olds, researchers warned that this is significant considering how close this group is to retirement age.

Steven Cameron, pensions director at Aegon, said that while greater confidence is “encouraging” the risk of overconfidence is a concern.

“Pensions have frequently hit the news headlines in the past few years. While at times this has been for less good reasons, there have been lots of positive stories such as the success of auto-enrolment and the new retirement flexibilities under pension freedoms. All of this has contributed to raising the profile of retirement planning, leading to people taking more interest and action, improving the confidence people have when it comes to being able to retire comfortably,” he said.

“But we must remain realistic. Overconfidence carries risks and people mustn’t be lulled into a false sense of security. While auto-enrolment means millions of employees are saving more for retirement, that doesn’t mean they’re on target for the retirement they aspire to or to maintain their pre-retirement standard of living. Furthermore, the growing population of self-employed are excluded from auto-enrolment and can’t rely on an employer to support their retirement funding. Realistically, there’s a lot more required to make sure you’ve saved enough for the retirement you would like.”

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