The Pensions Policy Institute has published a report looking at consumer engagement with pensions and financial products across the world, highlighting numerous lessons the UK can learn from overseas.
Getting people to save more is tackled in a variety of ways across different countries. While the Save More Tomorrow programme in the US has been widely lauded for automatically increasing employees’ contributions when they receive pay rises, the Netherlands holds an annual event to increase awareness and knowledge of pensions.
Targeting face-to-face sessions to cater for the individual quirks and characteristics of a workforce is particularly important
Nathan Long, Hargreaves Lansdown
This Dutch Pension3Days campaign is one of the examples cited in the PPI report. The pensions thinktank said the event shows how “clear objectives that are built around target groups enable a consistent link between the information and support offered and desired behaviour change”.
Croatia, Canada, Brazil and Australia are among the many countries discussed in the report, which looks at their awareness campaigns, targeted communications, digital innovation in pensions, and approaches to auto-enrolment and auto-escalation.
Learning from abroad
It is extremely valuable to look at different examples of how pensions engagement is being approached around the world, said Tom Selby, senior analyst at platform provider AJ Bell.
“It’s a case of learning from examples across the board… you want to go and pick and copy and paste from one particular country, and one particular way of doing things and try to adapt that to our own system,” he added.
The report states that employers can foster engagement and financial wellness, but also highlights the importance of collaboration between governments, employee organisations, providers and employers.
Selby said that “employers have got a huge role to play” given that people tend to have a lot of trust in their employer and are able to receive regular communications on benefits.
“A lot of good employers who are interested in employee engagement will get an [independent financial adviser] to come in and perhaps speak to a group of people to explain how pensions work,” he added.
Improving the pensions image
Phil Farrell, partner at consultancy Quantum Advisory, agreed that the report is useful in examining the variety of issues faced by different countries, and how they are tackling them. Although “we have made big strides forward in engagement in the UK, I still don’t think we’re there”, he said.
“I don’t think pensions are held in a particularly high esteem in the UK,” Farrell commented. “We are quite an impatient country,” especially “when you’re talking about taking money away from people for the next 30-40 years [and] exposing that to risk”, he added.
Francis Goss, chief commercial officer at communications firm AHC said that “interestingly, one of the points that I think really stands out is this move away from just the term ‘pension’ to ‘lifetime savings’, and that appears to be a view really across the world now”.
This concept of thinking beyond pensions towards lifetime savings is one of the points discussed in the PPI report with regard to approaches to engagement being underpinned with financial wellness.
“The terminology and the language used has to be more consumer-focused and has to engage with consumers in a way that resonates with them,” said Goss.
The government has a crucial role in engaging people with pensions, but “industry has a big part to play as well to ensure transparency [and] to ensure trust in the industry”, said Goss.
He thinks that the “pensions industry may have been tarnished by the broader financial industry reputational challenges, and of course the recent press around pensions schemes failing hasn’t done us any good”.
Schemes advised to use targeted communications
Goss also noted that personalisation and segmentation are important when it comes to communicating about pensions in order to “push the right messages to the right audience at the right time”.
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Nathan Long, senior pensions analyst at platform provider Hargreaves Lansdown, said that targeting was a useful way to drive higher levels of engagement.
“Unfortunately, the extent to which members can be guided to make good choices is being dampened by regulation,” Long added.
He noted that, generally, “employers are trusted by their staff, which is why collaboration between employer and pension provider or adviser is so crucial when attempting to up the levels of understanding and engagement”.
How you can encourage employees to save more
The trouble with saving, especially saving for retirement, is that most people find it hard to decide what to wear in the morning, let alone deciding and planning what they might need in 20, 30 or even 40 years’ time.
Long added that “targeting face-to-face sessions to cater for the individual quirks and characteristics of a workforce is particularly important”.
Ultimately, “a big enough retirement pot simply comes down to two things: how much you pay in and the investment returns you achieve. Improving these relies on good engagement”, he said.
