It may seem an odd question from someone who works for a communications consultancy, but the New Year is a great time to ask some challenging questions.
Communication is certainly a hot topic at the moment. The recently published Rookes Review into the British Steel Pension scheme concludes that trustees need professional help with communications, and many of the sessions at last Autumn’s PLSA conference saw a focus here.
So, why all the fuss about communication? Surely members don’t need to think (or do) much about their pension if the trustees and scheme managers are doing their jobs well? Auto-enrolment has addressed the challenge of encouraging people to save in the first place, and good scheme design, investment performance and governance should do the rest. Isn’t it best if members just ‘set and forget’, leaving their retirement savings in the hands of the experts?
Research by the PPI and Columbia Threadneedle found that 94% of group personal pension members invest in the default fund, but is that such a big deal? Do we really want members tinkering with their fund choices, reacting to volatile markets and risking their future retirement income?
The recently published FCA Sector Views report highlights that 48% of members claim that they have never read their pensions statement. To be honest, I thought that the number would be much higher. But again, why does it matter? The 52% who do read their statements probably don’t take any action anyway. It’s just information for information’s sake to be filed away in the pensions drawer.
I am being deliberately provocative, but unless we agree why member communication is important, it’s unlikely that we will see a shift in attitude towards communication. If we can’t articulate the benefits of effective member communication, it will always be regarded at best an optional extra and at worst a legislative burden rather than a core pillar of a successfully run pension scheme.
Here are just three reasons why communication really is important. I am sure that there are many more reasons, but it’s a good start.
1. Communication increases the perceived value of an overall reward package. We recently invited a group of HR leaders to rank their employee benefits in order of cost to the organisation and perceived value by staff. The pension was ranked as the highest cost but least understood benefit. Effective communication closes the gap between scheme costs and members’ perceived value of their reward package. Employee retention, productivity and advocacy are all positive outcomes of a greater awareness and appreciation of total reward.
2. Communication warns members of risks. Let’s face it, most members don’t spend the day contemplating the risk of running out of money in retirement, or the dangers of falling prey to a pension scam. Invariably members are not aware of these risks. Effective communication highlights risks and help reduce the likelihood of members opting out of schemes, becoming victims of pension scams because they were ‘never warned’.
3. Engagement leads to action. It’s impossible to engage without first communicating. A 50mph speed limit sign communicates to drivers, but a police camera van in the layby ahead engages them and leads to action! So too with pension communications, the ultimate aim is to engage members enough to trigger positive actions. Communication plays a vital part in increasing member engagement, leading to positive member outcomes.
So, next time you are grappling with the value of member communication, consider these three reasons. And if that doesn’t work for you, try spending ten minutes speaking with a 60-year-old employee who opted out of the company DB scheme when he was 19 years old because he thought that pensions were for old people. And that’s a true story…
Chief Commercial Officer – AHC