Rise in member contributions at Scottish Power shows impact of online tools
Energy company Scottish Power has seen a tenth of its stakeholder pension plan up their contributions following the introduction of a member portal that models pension outcomes and warns if an individual is likely to miss their target.
Engaging members with their pension provision has become more important in recent years as the introduction of freedom and choice widens the options available to defined contribution savers. Industry experts have stressed the importance of education in preventing poor outcomes in retirement.
The old model of setting contribution structure and default investment, then hoping members became experts hasn’t been working well
Anne Harris, UK pensions manager at Scottish Power, said the 2,500-member scheme used a phased contribution increase to encourage members to save more.
She said: “It may be at the moment they’re paying 5 per cent, but to get their target income they might need 15 per cent, which is a big jump. They can increase contributions automatically by 2 per cent each year.”
A third of members have logged on to the portal since it went live on December 8 last year. Its introduction has shown, despite prior concerns, that members were happy to increase their contributions.
“The feedback has been that... they like the fact something is done for them automatically,” said Harris.
The scheme now plans to monitor and maintain the ongoing engagement and contribution levels.
Harris said: “We’ve had very good stats but it really is only the start. We’ll be looking to use the data to do targeted workshops and keep people engaged.”
Green, amber, red
The portal is consultancy Hymans Robertson’s ‘Guided Outcomes’, which analyses a member’s contributions and investments to calculate their likely income in retirement.
It then gives the member a green, amber or red signal to indicate their likelihood of reaching their intended level and suggests remedies such as increased contribution or a later retirement date.
Paul Waters, partner at Hymans Robertson, said: “We can now tell members they probably need an income of X and… what else they might need to do.”
Waters said demand for online portals for members picked up around two years ago. “The old model of setting contribution structure and default investment then hoping members became experts hasn’t been working well,” he said. “While people do care, they find it a difficult subject to engage with.”
Lynda Whitney, partner at consultancy Aon Hewitt, said the push to educate people about their pensions has to be part of financial education more generally.
“For younger people, you’re better off talking about their overall finances,” she said. “These types of tools are becoming much more common. They’re part of the landscape of companies that want to invest in financial education.”