Many see the dashboard as a critical component in pensions communication. While the government's promise to commit £5m to the pensions dashboard project is encouraging, there is so much more that needs to be done by providers, consultants and employers if the initiative is to have any real impact.
It is an initiative that Huw Evans, director general of the Association of British Insurers, has described as a vital service that “will help millions of savers keep track of their funds and work out if they are saving enough for retirement”.
Over the past two to three years pension communication has been revolutionised. Auto-enrolment and freedom and choice have catapulted us into a new market
Ronnie Taylor, Aegon
Many see the dashboard as a critical component in pensions communication; if members can easily see where their money is invested and with whom, they are more likely to engage.
Yet there is so much more that needs to be done by providers, consultants and employers if the dashboard is to have any real impact.
Engagement must replace apathy
Members need to understand the importance of retirement saving, appreciate the relevance of pensions and believe that action taken now will result in a pot that will provide financial stability in later life.
Jim Christopher, principal at consultancy Mercer, said: “If a mountaineer is climbing Everest they hire a Sherpa to ensure they safely reach their goal. It is the same with pension communications; members need the right support to reach their savings goal.”
Leveraging inertia through auto-enrolment has played a huge part in getting 10m additional savers into workplace pensions. Yet for the policy to be a long-term success, stakeholders accept that engagement must ultimately replace apathy.
Stephen Lowe, group communications director at pension provider Just Group, said appropriate communication is particularly important given the advent of freedom and choice, which allows members to access their defined contribution pots at will from age 55.
“We are seeing record numbers of people accessing their pension pots flexibly and, as it’s still too early to know the longer-term consequences, it is crucial the industry strives to support consumers with their decisions wherever possible.”
Lowe added: “Guidance and advice are the best antidotes to the dangers that lurk when choosing how to use pension money, such as paying unnecessary tax or taking too much too soon.”
The good news is what Ronnie Taylor, chief distribution officer at Aegon, describes as a "revolution in pensions communications". He argued that freedom and choice and auto-enrolment have changed how providers and employers engage with members.
He said: “Over the past two to three years [pension communication] has been revolutionised. Auto-enrolment and freedom and choice have catapulted us into a new market.”
Taylor said Aegon invests between £5m and £10m in its workplace pension proposition each year, of which “a significant amount” is dedicated to communications.
Personalisation key to good comms
Money alone cannot improve communications however. The focus must be on thinking intelligently about what members want, and this may not prove straightforward.
Typically communications have targeted age groups, the assumption being that 25-year-olds will have the same financial needs. Yet, Christopher says generalised messages about pensions have less impact than tailored ones.
Christopher said: “Where employers measure the result of communications, without a shadow of a doubt, the results from personalised messages are more effective.”
In 2016 Mercer personalised members’ annual pension statements using videos sent to individual email inboxes. The results, said Sean Westwood, DC and financial wellness principal at Mercer, have been profound.
Key ingredients for successful pension communication
Understand the needs of the workforce
Personalise the communication
Time communication to coincide with a relevant event such as annual statements
Use a variety of media to deliver the message
Allow individuals to take action immediately where relevant, such as increasing pension contributions
Measure the efficacy of the communications exercise
Keep communications programmes under review
Two-thirds of members viewed their personalised video, of which 45 per cent clicked to take action, such as increasing contributions.
Westwood said: “The call to action is immediate; once they watch the video they can make a change there and then.”
Industry will continue to innovate
This is a message that seems to be getting through to the workplace. The Reward and Employee Benefits Association 2017/18 Technology Survey, sponsored by JLT Employee Benefits, found that 38 per cent of employers would make personalisation communication a priority this year.
The advances in pension communication are significant; the trend away from segmentation based on age in favour of personalisation is to be applauded.
However, there is only so much tailoring that can be done within the 0.75 per cent charge cap imposed on default auto-enrolment schemes. Employers too are limited in the amount they can invest on personalisation.
Fortunately, innovation in this area continues apace, suggesting it will become easier and cheaper to provide personalised pension communication that drives positive savings behaviour today and for the long-term.
