By Charles Cotton, CIPD’s Senior Advisor on Performance and Reward
A new campaign launches later this month in the UK, which gives HR teams an opportunity to review how they communicate about their workplace pensions. Building on the existing Pension Awareness Week and Talk Money Week, this campaign a particularly timely prompt as employers consider different ways of supporting their employees’ financial wellbeing. The Pension Awareness Week running now in Ireland is a similar call to action for Irish organisations.
Employers spend lots of money on pensions every year. Not just in contributing to their employees’ pension pots, but also in time, energy, and money spent in such areas as employee education and communication, legal compliance, and pension administration.
Many employers go beyond the legal minimum to better attract and retain staff, promote their financial wellbeing, and to foster their commitment to the organisation and the job. The CIPD’s 2022 Reward Management Survey found that 62% of employers provided a minimum pension contribution worth 6% of pay. While almost all public sector organisations contribute this proportion, in the private sector, as many as two-fifths of firms do this.
In the same survey, 83% of workers said that being able to save for the future is an important element of their financial wellbeing, such as through a workplace pension.
However, despite the large amounts of money being spent on staff pensions, I often hear HR and reward practitioners complaining that most employees at their organisations simply don’t appreciate their workplace pensions and that a lot of this expenditure might be going to waste.
Do employees value their workplace pensions?
Various surveys show a lack of pension awareness and understanding.
For example:
- ‘According to the Financial Services Compensation Scheme, around 20 per cent of people say they have ‘never’ checked their pension balance.’
- ‘30% of employees do not know the total value of their pensions, according to research by retirement, workplace savings and protection solutions provider Aegon.’
- ‘According to PLSA research, 77 per cent of savers don’t know how much they’ll need.’
- ‘Two in three people are unaware that their pension is invested in the stock market, finds Hargreaves Lansdown.’
Insights from behavioural science supports this assumption. As our report Show me the money! The behaviour science of reward states: ‘Empirically we tend to value distant future events lowly and they suddenly increase their subjective worth to us as they get closer. If we consider a pension, the subjective value of a pension plan will be low throughout most of an employee’s career, suddenly rising towards the end of their career as retirement approaches. This sudden rise suggests a hyperbolic valuing of distant reward’. In other words, we only start to think about pensions the nearer we get to retirement.
However, rather than pensions causing apathy, could it be that the way employees learn about pensions is the problem? For example, we could use insights from behavioural science to frame the message: you could be losing out by not giving your pension some attention. People might be more concerned about losing out by not giving some time to their pension then they are to the notion that they will benefit from having a pension.
All this points to a need for organisations to communicate the value of pension contributions both proactively and regularly as part of the reward package. This communication should be based on the insights from behavioural science such as aversion to regret, anchoring and myopia bias.
How to raise pension awareness
One way of raising awareness and understanding is by taking advantage of a new campaign run by the Pensions and Lifetime Savings Association (PLSA) in partnership with the Association of British Insurers (ABI).
The new ‘Pay Your Pension Some Attention’ campaign (or ‘Pension Attention’ for short) aims to break through the public’s lack of interest and make pensions a talking point for people going about their everyday lives, including their working lives.
The campaign will run from late September to November this year, the first of a three-year cycle. Initially the objectives are to help people reconnect with their pensions.
In particular, savers should:
- feel good about having a pension
- be sure their personal details are up-to-date, and
- know what they have and might need.
The Pension Attention campaign will incorporate Pensions Awareness Week (31 October – 4 November) and Talk Money Week (7 – 11 November). It will also look to work with events such as National Pensions Tracing Day (30 October).
You can register with the Pension Attention website to learn more. The campaign has a Twitter account (@PensionAttn) and is encouraging people to engage with the hashtag #PensionAttention.
HR and reward teams based in the Republic of Ireland can increase employee awareness and understanding of their own workplace schemes by taking part in the Irish Pensions Awareness Week (19–23 September).
Both UK and Irish initiatives are a great way to encourage employees to think more about their workplace pensions as well as their retirement. HR and reward teams can use these opportunities to review and assess how they talk specifically about pensions and employee financial wellbeing in general, as well as promoting other aspects of the plan, for instance matched contributions or auto-escalation. It’s also a way of answering questions from staff about the consequences of cutting their pension saving or leaving the plan altogether because they are struggling due to the rising cost of living.
If you have any questions about the Pension Attention campaign, please contact the campaign team at info@pensionattention.co.uk.
