With the increase in the minimum pension contributions for automatic enrolment from April 2019, it is important employers think about the value employees are attaching to this particular benefit.
Employer contributions increase to at least 3% of pensionable pay, representing a significant increase in cost. However, in many cases, employees are unaware of this or do not pay close attention to their pension to appreciate the added value this is providing.
In a nutshell, a clear and effective communication strategy is what encourages employees to focus on their benefit package, and a pension is no exception. For most employees, a pension scheme is a tangible benefit – to that end, I have a few suggestions on how to ensure communications to staff on this point are effective.
Although automatic enrolment requires employers to issue statutory notices to any new joiners, the reality is, this will not be enough to keep employees interested in their pension on an ongoing basis. Regular bespoke pension updates can serve as a timely reminder for employees to look at their pension and think about their retirement planning.
Employers could include financial education as part of their employee benefits package. This would involve a financial professional carrying out a presentation or providing one to one meetings with employees so they can make informed decisions, leading to financial wellbeing.
As their pension is likely to be an integral part of an employee’s financial planning, this support can help employees realise the value of their pension as part of their long-term financial plan. Subsequently, they will value both their employer’s contribution and their support.
Pensions are likely to be more of a priority for those approaching their retirement age than those just starting their working life. However, decisions employees make early in their working life regarding their financial planning can have a significant effect on their options at retirement and they can benefit from adopting a long-term strategy. Assistance such as the financial education mentioned above can be tailored to the age of the employees, ensuring each section of the workforce remains engaged with their pension.
Many employers have challenges in communicating with their workforce if, for example, employees work at different sites or in some cases, simply do not have up-to-date contact details. If communication is to be effective, employers must ensure they have the correct details and channels to keep their employees informed. The implementation of company emails, regular team meetings or even having a simplified process for employees to update their employer of any change of contact information can have wide-ranging benefits to the business, as well being able to engage employees with the pension.
Communications can fall flat if sent at the wrong times. For example, an update on pensions is less likely to be read if sent just before the end of the day or at times when there is an increase in employees being on annual leave. Employers should think about the best times to send their communications to ensure they have maximum impact.
In summary, the key to making benefits such as pensions appeal to employees on an individual basis is good communication. Pensions are undoubtedly a great benefit to many staff – not only is there tax relief available, but additional employer contributions will boost their retirement savings.
By raising awareness effectively, employees will likely pay closer attention to their retirement savings and, if employees are satisfied with their finances, they are also likely to be more productive – research suggests 36% of employees have been distracted at work due to money worries¹. Therefore, boosting the effectiveness of communication can demonstrate a return on investment for the employer – the more employees understand their financial planning, the more productive they are likely to be.
¹. 2017 MetLife Employee Benefits Trend Study