Interesting employees in their pension arrangements has always been something of a challenge for companies. Trying to explain vital but apparently complex changes in regulations prompted by auto-enrolment, when the value of pensions is falling and the industry is still smarting from a mis-selling scandal, is even more difficult.
Worse still, that mis-selling of pensions and increased regulation around financial services means the pressure on companies to ensure that their staff are fully briefed – and cannot claim in years to come that they were misled – is greater than ever. Too many companies, though, are failing in their efforts to communicate effectively, according to experts.
“Companies are not particularly good at it because the pensions industry is not particularly good at it,” says Logan Anderson, head of customer relations at the Pensions Trust.
“This is partly why auto-enrolment is being introduced. Signing on the dotted line at the bottom of a series of bewildering statements is not appealing to many people and so often they don’t join. With auto-enrolment, you have to sign to leave.”
Darren Philp, director of policy at the National Association of Pension Funds, says: “One of the common criticisms when it comes to pensions is that the language used to communicate is often unfathomable and full of small print. This puts off many people, so it’s very important that the information provided is simple, concise and can be understood by the man or woman in the street. Sometimes firms can be too cautious about talking about their scheme because of misplaced fears about giving financial ‘advice’ to staff. In fact, there are quite broad powers for employers to talk about the benefits of their pension scheme with their employees.”
A key part of the government’s strategy is that employers must not encourage their employees to opt out
Many companies who fail to communicate effectively have done little research into what their employees know and feel about pensions, says Neil Strong, strategic consultant at employee benefit communications consultancy Shilling. Regular updates are also essential.
“Don’t think that what has been done in the past will work again,” he says. “People’s needs change and the way that we can receive communication is evolving with the increased use of technology, such as smartphones and tablets. The same messages now may need to be accessible in multiple formats.”
With their extra resources, larger organisations tend to be better at communication than smaller ones, although there are exceptions, according to Rosalind Connor, partner in the pensions team at international law firm Taylor Wessing. “Generally large organisations with an in-house HR and legal team are able to produce excellent tailored communications,” she says.
“Inevitably some smaller companies are having to rely on standard form communications from a third party and these may be less sensitive to the particular issues of the company. Having said that, as this becomes an important company issue, small and medium-sized enterprises have often been better at getting senior staff involved in the communication process directly. For instance, the finance director or chief executive is often part of the process of communicating the issues to the workforce which in itself can be an excellent way of communicating.”
The key to success in pensions communications is to take a strategic approach that is tailored to a particular organisation’s needs rather than relying on ticking boxes and pumping out literature. Most companies making changes to their pension schemes will need to run a consultation process with employees and unions, normally lasting two months. So they will need to build this into their timetable and put thought into the wording of the consultation.
“The companies that need to plan most carefully are those that have flexible benefits schemes,” says Mark Baker, pensions expert and partner at solicitors Pinsent Masons. “To avoid the risk of over-paying benefits, it’s vital to explain to employees that their choices might need to be altered part way through the year as a result of pensions auto-enrolment.”
As well as this, he says, a key part of the government’s strategy is that employers must not encourage their employees to opt out. “The signs are that the Pensions Regulator will come down especially hard on companies that don’t get this right. So employers must make absolutely sure that all their pension communications avoid saying anything that could be seen as inducing employees to leave the scheme.”
Differentiating between higher and lower earners, and making communication personal helps employees to engage, says Tessa Wishart, a senior consultant at HR consultancy Towers Watson. “We find that a marketing campaign approach helps employees connect with saving for retirement emotionally,” she explains.
“Employers should consider branding their scheme and auto-enrolment communications to identify any campaign. We also find that being clear on the outcomes for employees and the stark reality of not saving reduces the blind spot, and as a result members take action, contribute more to their pension and/or begin taking investment decisions to suit their needs.”
More generally, help with communication is available from organizations, such as the National Association of Pension Funds, which offers leaflets and awards a Pension Quality Mark as a badge of high quality for employers who use clear and engaging communication as part of their above-average pension arrangements. Communicating about pensions is a challenge – but one that more companies must take up.
Need information? It’s a wrap…
When retirement home builder McCarthy & Stone decided to change its employees’ pensions arrangements to a corporate wrap system, which offers an integrated financial planning platform, it called in Hargreaves Lansdown to help communicate that change.
All employees were able to join in person through the branded website, over the phone or by post. The Hargreaves Lansdown financial education team held 19 group presentations and 314 individual meetings across six company sites. Employees receive branded information about the scheme, investment guidance and fund alerts. A website, maintained by Hargreaves Lansdown, gives employees easy access to financial planning tools.
“Pension membership has gone up by 20 per cent,” says Paula Jordan, McCarthy & Stone’s human resources director. “Nearly half the pension members have increased their contributions since joining. It quickly became apparent some people knew little about their pension and what it could offer them. They now understand this much better and have taken control of their retirement.”