As we discovered in our last blog, auto-enrolment has been a success, but there’s still room to improve savings levels, even after the total minimum contribution increases in April 2019. New regulation can definitely help to shape our future thinking, but is it the only way to increase people’s engagement with their pension?
More than regulation
So regulation has increased membership levels. And research by the Pensions Policy Institute (PPI) commissioned by Standard Life suggests that outcomes could be improved by 64% by introducing the recommendations published in the DWP Automatic Enrolment review 2017 report. But studies also show that with imposed contribution rates, employees see themselves as having little personal control. What’s the way forward?
Effective engagement can change people’s perceptions of the value of saving for retirement.
The challenges ahead
The challenge to effectively engage employees extends way beyond workplace pensions.
Overall employee engagement – measured by Glassdoor data – is flat year-on-year. In their 2017 study, Global Human Capital Trends, Deloitte reports a 14% decline in organisations’ ability to address issues of engagement and culture since the previous year.
Overcoming the challenge
So how can we overcome these challenges and use engagement to complement auto-enrolment and influence attitudes towards pension savings? The first step is to understand what we believe to be the three elements of influencing behaviour: capability (being able to afford to save), opportunity (having access to a pension) and motivation (recognising the need to save).
If we combine these elements with ‘nudges’, we can see genuine engagement and behavioural changes. Nudges are small ‘pushes’ that can create an emotional response leading to positive action. If people are nudged at the right time this can have a big impact.
Supporting you and your workforce
At Standard Life we commissioned an exclusive study with Scott Porter Research to explore different ways to engage people with contribution phasing.
The good news is, you can apply the findings in your business.
We wanted to find out the best way to increase employee engagement with their pension but at the same time, make sure messages are received in the right way.
So we tested various versions of the communications: one was formal and the other less formal with a more approachable tone.
These were our main findings from the initial testing.
- The power of language: we discovered that it’s vital to get the balance right between being relatable and also being professional.
- Personalisation: we found that a personal approach improved motivation. We included some illustrations to show the impact of paying just a little more and these made the benefits very tangible.
- The power of delivery through the right channel: our sample group thought a letter offered the most personalisation, as well as access to tools that help people model different scenarios.
So where are we now?
The research showed how effective employee engagement interventions can completely change people’s perceptions about the value of saving for retirement. And not just change them slightly; they can change from ‘It’s another cost’ to ‘This is really good: (paying more has) had a bigger impact than I would have realised’.
Standard Life clients will soon be able to access employee letter templates for the 2019 auto-enrolment contribution phasing and these will be available through your regular point of contact.
The best way forward
Employee engagement is vital – but it’s important to look at how the regulatory landscape can shape the way ahead too. Regulation, such as contribution phasing, is a good catalyst for change. But this needs to be combined with a carefully considered communication strategy.
Download the full article to read more about the research and the tangible actions you can apply to your business.
The views expressed in this blog should not be regarded as financial advice. A pension is an investment and its value can go down as well as up and may be worth less than was paid in. The information here is based on our understanding in September 2018 and shouldn’t be taken as financial advice.