Communicating pensions to the next generation

A lack of interest and engagement from the younger generation is pointing towards a future pension crisis.

A lot is made, across all industries, about the need to use the latest technology to get inside young peoples’ heads. The truth is that if the content is relevant to their lives, they’ll come to you

Karen Bolan, AHC

Employees aged 50 and above are almost twice as engaged with their pension scheme as those aged 34 and under, according to research by provider Aegon and the Confederation of British Industry.

Younger people tend to have competing priorities, such as paying off student debt or saving to get on the property ladder.

They may also be less motivated to engage with pension saving than their older counterparts because they are further away from retirement age.

Forty-four per cent of people aged 25-34 admit to putting off saving or investing for long-term things like retirement, as it “seems silly to focus on something so far away”, according to BlackRock’s 2018 DC Pulse Survey.

The survey also found that almost half of 25-34 year olds believe they should ideally be contributing 15 per cent or more into their DC pension, between them and their employer, but in reality fewer than a third are currently doing so.

“I think the greatest challenge is that it’s human nature to think about today and tomorrow rather than the long distance and that’s a challenge for lots of sectors,” says Simon Grover, lead writer at Quietroom, a communications consultancy.

Mr Grover says trustees and other people in the industry have priorities to find investments that perform well for members, while ensuring they obey all the relevant regulations.

“Communicating to members and thinking about their long-term future is one of the many things on their list of things to do. You have to have some knowledge and understanding of behavioural economics and psychology to understand what buttons to press with people and, again, these people [trustees] are unlikely to be experts in that area,” adds Mr Grover. 

Young people want to make a difference

Many young people want to invest their pension in organisations that reflect their ethical views.

Mr Grover notes that people do not understand where their invested money goes. “For young people, you can start talking about responsible investing, which is a slightly newer area and it’s not just about investing in a company that did well last year. They like the idea that their money could be doing some good.”

He says trustees have not explained the social benefits of investing in a pension: “It is something schemes have not explored at all. They haven’t tried to engage members in what their money is doing. Particularly with young people, not only do they want to do good, but there is also a feeling there is very little they can do.”

Mr Grover says the younger generation look at the world and wonder what difference they can make.

“Every month some money is going into their pension pot, and that money is being invested, which could potentially be doing some great things. So that’s something that could really engage young people,” says Mr Grover.

Content should resonate emotionally

Karen Bolan, head of engagement at AHC, an independent pension communications specialist, says: “As much as we’d like young people to be a homogeneous group, with a single view and a single road to engagement, it simply doesn’t work that way.

“A lot is made, across all industries, about the need to use the latest technology to get inside young peoples’ heads. The truth is that if the content is relevant to their lives they’ll come to you,” says Ms Bolan.

She adds that when creating content for young people, the industry should get to the point as quickly as possible.

In addition to keeping messages clear and simple, experts see tailored communication as crucial.

Karen Partridge, AHC’s head of client services for UK and Australia, says: “The key to engagement is messaging that talks directly to the member. A personalised approach is most effective, engaging the user with their very own individual circumstances, using clear messaging, delivered in familiar media.”

Encouraging individuals to think long term can be challenging. Consultancy Hymans Robertson recently tackled this problem with a video asking children what they think the world will be like when they grow up.

Nathan Fulwood, strategy director at CreateFuture, the consultancy that made the video, says: “The problem we faced was two-fold: bringing urgency to a crisis that’s maybe a decade or more out but not seen as immediately pressing, and to make a complex, multi-faceted problem simple and relatable.”

“The result was a campaign centred around three short videos: Hymans experts trying to explain the concept to kids,” says Mr Fulwood.  

Adapting to technological advances

If pension schemes are advised to only use technology where it is relevant, they will also have to adapt their communications to keep pace with relentless advances. If communication strategies do not advance, they may struggle to engage their audience.

According to Hymans, by the year 2030, almost one-third of UK jobs will be carried out by robots.

Julie Hammerton, a lead consultant at Hymans Robertson’s Incubator division and the creator of the consultancy’s Better Futures project, says current issues in pensions include intergenerational fairness, artificial intelligence and its impact, lack of savings and longevity.

“Then you have the technology side and the impact this will have on jobs and the future for our children. These [topics] are tackled in isolation but not necessarily in the round.

“On the pension side, people are entering the market trying to help with consolidation to get all your pensions in one place. We are now seeing a lot of the traditional providers starting to think about how they can become more like start-ups, and perhaps even partnering with many startups.” Ms Hammerton adds.

Calum Cooper, a partner at Hymans, says: “The pace of technology development will be much faster than we are prepared for. Given these large developments in technology, longevity, long-term savings patterns and the fact that we are saving less than prior generations, we looked at what the future holds for us, our clients, so we don’t sleepwalk into it.”