Let’s be blunt about this, communications with members of defined contributions can suffer incredibly low click through rates.
A strong indication on what is going wrong was given to us by our Generation WHY? survey carried out across 1500 members. It showed high levels of worry about short and medium term financial concerns, to the extent that it is easy to see how the long-term issues of saving for a pension could be sidelined.
We learnt that 65 percent had lost sleep worrying about their finances, while 36 percent said their main priority was to save for a house. The issues facing the youngest workers was recently also highlighted by peer to peer lender Zopa which estimated most 16-24 year olds would be aged 74 before they are debt free.
Trustees of DC plans must acknowledge those members who have such challenges before hoping to succeed in engaging on pensions. Ideally, this is done collaboratively with employers, who should welcome the opportunity to improve workforce well-being.
Engagement could include tips on how to pay off student debts and information on corporate ISAs, LISAs and share schemes. It could inform of tools such as Neyber, which works through employers to help staff consolidate their debts and get them away from loan sharks.
"The first step for trustees is to carry out their own research into their members’ financial priorities. So, if it turns out the short-term and medium-term are what is of most interest to your members, then what pension message can you give them?"
The first step for trustees is to carry out their own research into their members’ financial priorities. So, if it turns out the short-term and medium-term are what is of most interest to your members, then what pension message can you give them?
Our best advice is to tell employees in their twenties to stay saving however small the contributions. For those aged 30-50 you should be offering modelling tools to show them how much an impact extra saving and their retirement dates will have on their income in retirement. The communication should say “if you want to retire at this age this is what you need to do”.
Our survey shows that inadequate pension pots were common in this age group, but you are not going to get members to raise their contributions by 10 percent in one hit. Simply getting an individual to increase their contributions by 1 percent a year over the next five years will improve their pension by 56 percent. For those aged over 50 the advice should be around how and when to take their benefit.
All this goes to show the responsibility faced by trustees of defined contribution schemes is enormous and often goes unappreciated. The decisions they make now will help determine the quality of retirement their members will have. Research and engaging on short to medium term financial issues has got to be the starting point on that journey.
Download a copy of our insightful 'Generation Why?' Survey below.