Improving workplace pension employee communications

Six steps to help employees engage with their workplace pension

Helping employees save for retirement is vital for ensuring they have enough in their pension pot for their future aspirations and desired lifestyle.

However, a recent study by the Institute for Fiscal Studies (IFS) has warned that 90% of those currently in their 30s and 40s are saving less than needed for a decent standard of living in retirement. While the current generation of pensioners is doing better than any before it, there is a major risk that future generations will not fare as well.

While SMEs are obliged to provide a workplace pension for their employees, some are doing very little beyond the minimum requirements of setting up a scheme and making the minimum contributions, which can impact people’s ability to save enough for retirement. However, there is a great deal more they could be doing around engagement and communication.

Our recent research with 500 SME business employers and 500 SME employees found that the majority (90%) of employees believe they aren’t encouraged to save more into their pension, and almost a fifth (18%) were not confident in their understanding of their workplace pension and retirement options. SMEs are far from alone in this, as a report from the Department of Work and Pensions earlier this year highlights the lack of engagement there is around pensions. They found that attitudes to pensions were characterised by detachment, complacency and fear, which acted as a barrier to engagement.

The challenges for SMEs

According to our recent research, workplace pensions are considered the most valuable benefit by employees, however, they are often not given the importance they deserve in terms of communication and engagement. SMEs can struggle to communicate effectively about pensions due to a lack of expertise, time, and resources. While scheme providers may offer good communications, they are often not passed on to employees as SMEs are too busy running their business.

Even when schemes communicate directly with employees, the level of interest and engagement is often poor, as pensions are perceived as complex and difficult to understand. Furthermore, younger employees may not see retirement as a priority in their day-to-day lives.

To improve employee pension engagement, SMEs can take six steps.

1. Providing regular emails and letters about the pension performance, and producing a yearly pension booklet for all staff, can help boost engagement. Having information on the intranet about the pension and regularly signposting people to it can also be effective.
    
2. Where possible, employers personalise their communications as employees are far more likely to engage with information that is personalised and relevant to their individual circumstances. This can be achieved using digital tools, such as online portals, which allow employees to view their pension savings and projections in real-time.
    
3. Education is also vital: Many employees are unaware of the benefits of saving for their retirement, the tax incentives of pension contributions, and the potential pitfalls of not saving enough. SMEs should provide regular education and guidance to employees to ensure they have a good understanding of their pension options and the impact of their choices.
    
4. SMEs could also encourage employees to save more into their pension by highlighting the benefits of doing so, such as the potential for higher retirement income, tax relief, and employer contributions.
    
5. For those employees who are unsure about their pension options, or who require more guidance, SMEs should consider offering access to independent financial advice. This can help employees make informed decisions about their pension and ensure they are on track to achieve their retirement goals.
    
6. Regardless of their budget, there is always something SMEs can do to promote better engagement, and making this a priority is the single most significant difference they could make to an employee's future.

How we can help

Helping employees visualise their future retirement and to understand the more they do now to save for retirement, the better off they will be, is important. This message is particularly important for younger generations who have the greatest opportunity for their pension investment to grow.

Our team recognises that SMEs often don’t have the time or resources to dedicate to pension communications, that’s where we come in. We aim to simplify pensions and make them accessible to all and provide plain, jargon-free support to help employers and employees to help them get the most from their workplace pension.