Why effective pension engagement is even more crucial when your peoples’ financial pressures grow

Supporting the long-term financial security of your people | 4 minute read

Whether they’re related to wider economic trends or more specific, individual situations, times of financial hardship can hit any of your people at any time. In response to such times, we see people considering reducing or pausing their pension contributions, unaware of the threat this could pose to their long-term financial wellbeing.

Key takeaways

1. An effective pension engagement strategy can help your people better understand the value of their pension contributions and the risks of putting these on hold

2. Effective pension engagement can encourage your people to make more informed pension decisions by helping you deliver the right information in the right format at the right time

3. The most effective pension engagement strategies leverage a good pension governance framework to help deliver targeted, timely communications

Why does pension engagement matter?

While reducing pension contributions may give your people the feeling of a better financial position, we believe there is a commercial benefit for your business in helping them understand how doing so could impact their long-term financial wellbeing.

1.8m

Britons have reduced or stopped pension contributions to better manage daily expenses¹

Source: Financial Conduct Authority (FCA)

1 in 4

are set to delay their retirement because of financial pressures²

Source: PMI

The challenge: breaking the cycle

Financial pressures don’t necessarily directly affect peoples’ retirement outcomes; they’re more the fingertip knocking the first in a long line of dominos off-balance. There are a number of factors and decisions (or lack thereof) that make it possible for the potentially harmful domino effect to continue:

Financial pressures mean salaries may not stretch as far

Your people reduce or stop pension payments to help cover living costs more comfortably

This can carry on for the long-term, even if their financial situation improves

After a prolonged period of time with less pension savings, the negative impact on their overall pension pot could be considerable

So, how can employers like you hope to break the cycle before your people get to stages two, three and four? Here are three ways an effective pension engagement strategy can help communicate the importance of pension savings, encourage your people to think twice before putting their pension on hold, and potentially help to support long-term employee financial wellbeing as a result.

1. Tailored communications

In order to engage your people on the importance of their pension, you first have to reach them. Sounds like a simple concept, right? However, with each of your people having their own needs and preferences, communicating to your diverse workforce can be a complex task.

Here are examples of three employees and their pension engagement needs, to illustrate just how different the members of your workforce can be:

From helping you deliver mobile notifications and emails to written letters and in-person sessions, an effective pension engagement strategy can help you:

Leave behind outdated, ‘one-size-fits-all’ strategies and send communications that truly resonate with each of your people
Deliver pension information in a way that may better encourage your people to stop and take note and therefore more readily engage with their pension
Better help your people understand the value of their workplace pension, and the impacts of reducing contributions

2. Targeted, data-driven nudges

Pension engagement is important throughout your peoples’ lives and careers, but there are certain life events and milestones that can present a particularly effective opportunity to deliver engaging pension communications. However, keeping track of when your people hit these milestones can be a complex task, and sending timely, targeted communications once they do can be tougher still.

By leveraging a good pension governance framework and the data insights this provides, an effective pension engagement strategy can help you:

Send engaging, timely nudges automatically to your people at all the major key moments in their life
Deliver effective pension insights and engagement when your people need them most
Empower your people with the understanding to make the right pension decisions at the right time

3. In-person specialist support sessions

Financial pressures can affect your people in different ways, and with something as vital as their long-term financial security, we find that people can be more reassured by a more personal, bespoke approach to pension communications.

Whether as part of a group or one-to-one, in-person sessions are a great way to engage your people with their pension in times of economic hardship, because they:

Allow for tailored information and guidance in real time to help people navigate more individual financial challenges
Could help build better understanding and trust in the value of their pension, compared with digital or paper communications
Demonstrate the company’s commitment to its people and employee financial wellbeing when they need it most, which can help boost morale and loyalty

Good governance and the power of data

Good governance is crucial in helping to make an effective pension engagement strategy more achievable.

To effectively encourage employees to interact with their pension as early as possible in their career, we always recommend that our clients have their engagement strategy and governance framework working hand in hand:

Governance framework	Engagement strategy
Gives you access to data trends relating to how your people interact with their pension, as well as the messaging and communication methods they respond best to.	Involves utilising this data to ensure what and how you’re communicating with your people is as targeted, relevant and impactful as possible.

An employer’s guide to workplace pension engagement

Want to learn more about how driving positive engagement can help your peoples’ financial futures? Our specialists wrote this guide to help employers like you understand:

The benefits an effective engagement strategy can bring to not just your people, but your business as a whole
The methods and messages you can use to best capture your multigenerational workforce
The key components we think should form the foundations of a good engagement strategy

Download your copy

Pension disengagement can pose a threat to your peoples’ long-term financial goals, so it’s important for employers like you to understand your vital role in reversing the negative trends.

Adam Burn
Head of Pension Consulting

Let’s talk solutions

To discuss your needs with one of our employee benefits specialists and learn how we can help you design, deliver and manage an effective workplace pension engagement strategy, reach out to us today.

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This insights article is not intended to address any specific situation or to provide legal, regulatory, financial, or other advice. While care has been taken in the production of this article, NFP does not warrant, represent or guarantee the accuracy, adequacy, completeness or fitness for any purpose of the article or any part of it and can accept no liability for any loss incurred in any way by any person who may rely on it. Any recipient shall be responsible for the use to which it puts this article. This article has been compiled using information available to us up to its date of publication.

NFP contributors

Adam Burn
Head of Pension Consulting

References