Pensions World

After auto-enrolment, employers must support their new scheme members to keep them on board urges Girish Menezes, ACS

Auto-enrolment is almost upon us and according to research from the National Association of Pension Funds (NAPF) (Workplace Pensions Survey, March 2012) and data from the KiwiSaver (Annual Report, July 2010 to June 2011), an estimated 56% to 72% of the UK population will be enrolled in an occupational pension scheme of some description. We have a responsibility to ensure that these members, who are being auto-enrolled without their permission, truly value their pension scheme.

Most employers are focused on the mechanics of the process: the increased cost of contributions, agreement on the qualifying scheme to be used and identification of eligible members. They are spending very little effort on communication and other strategies needed to engage these additional members once they are auto-enrolled. The NAPF’s Annual Survey 2011 states that only 13% of employers felt they were prepared in this regard.

So how can we support these newly eligible members and encourage the maximum number of them to remain in our schemes? Perhaps the best place to start is by understanding the reasons why they would join and, on the flip side, why they may opt out of occupational pension schemes.

In the NAPF Workplace Pensions Survey, the key reason for respondents to stay auto-enrolled were the additional impact of employer contributions, appreciation of the tax incentives and a belief that the scheme was affordable. Reasons for opting out included a low level of trust in the pensions industry, followed by affordability. So how can we use this information to support our increased membership?

Show me the money

Employer contributions and tax incentives are key reasons for staying in a scheme, but we need to ensure that we meet a minimum benchmark. The NAPF quality mark of a minimum 6% employer contribution can ensure that a scheme is worth remaining in. We can also clearly communicate contribution rates, the impact of interest compounding and tax.

Matter of trust

The “Financial Frontier” research conducted by Buck Consultants reflects the NAPF research that employees have fairly low levels of trust in their employers and the pension industry. Our research suggested that employees tend to trust family and friends most, followed by independent media reports and then social media websites. Adding online capabilities to allow transparent discussions between members, and access to independent research reports and comparison statistics, will help build trust and increase engagement.

Bringing pensions alive

It is essential to build enthusiasm around the reasons that people should save for their retirement. While making pensions fun and interesting to members is challenging, it can be done. For example, at Buck, we have been working with our research scientists in Palo Alto on the gamification of educational content around retirement savings. Gamelets can be played on a smart phone or computer. They can be pivotal in helping members understand the importance of starting to save early, the effect of interest compounding, employer contribution rates and the savings gap they need to bridge.

Positive feedback loops

Finally, we need to ensure that pension information and progress in saving for retirement is regularly communicated in a positive manner. Monthly emails can remind members that their contributions have been invested and are going toward savings. The member can click straight from the email to a pension website, gamelet, fund fact sheet, or modeller to see exactly how close to the goal he or she currently is. This reinforces the savings message over time.

Overall, while determining the mechanics of auto-enrolment is highly important, caring for members once they are in your scheme – estimated at 70% of the eligible UK population – is even more critical.