How to boost pension engagement in your organization

'Opting out of their pension will have a huge impact in the long term,' says expert

A recent WEALTH at work study has uncovered a worrying trend: While a minority of employees (13%) have already acted by either reducing or ceasing their pension contributions, 30% of respondents admitted they might reduce their contributions, while 29% stated they might stop contributing altogether. 

Jonathan Watts-Lay, director at WEALTH at work, issued a cautionary statement, emphasizing the importance of understanding the long-term consequences of opting out of pension contributions.  

“It’s important for individuals to understand that opting out of their pension will have a huge impact in the long term and will cause damage to their standard of living in retirement,” he said. “Whilst reducing contributions now would make relatively small savings each month, the impact on retirement savings in later life will be dramatic, due to lost employer contributions and tax relief.” 

Employers must take the steps necessary to keep their employees engaged with their pension plans. Employee Benefits provides five steps that can help achieve this goal: 

Provide financial education  

To increase employee engagement with their pensions, consider offering interactive financial education workshops that delve into pension options and retirement income alternatives. Customizing these workshops according to employees' career stages can be particularly effective: 

  • Early-career employees, who are just starting out, can focus on establishing savings habits. They should also be educated about the potential benefits of increased contributions, possibly with additional support from the employer.  

  • Mid-career employees can undergo a ‘financial MOT’ to assess the alignment of their pensions and other retirement savings with their goals. This stage is also crucial for understanding how income can be generated during retirement and ensuring that investments are managed accordingly. 

  • Pre-retirement employees can receive support for retirement planning, including understanding various retirement income options, debt management, and optimizing pension benefits and other savings in a tax-efficient manner.  

Access to resources for support  

Cater to diverse learning preferences and work environments by providing various resources such as interactive tools, videos, animations, or even online financial health checks. These resources can help employees understand pensions and the choices they face in retirement. 

Financial guidance sessions 

Personalized one-on-one financial guidance or coaching sessions can be especially beneficial for employees who require a deeper level of knowledge about their pension options, particularly those nearing retirement. These sessions can be conducted via video calls or telephone, helping individuals determine their next steps and whether they require further support, such as regulated financial advice. 

Access to regulated financial advice 

As employees approach retirement, consider offering access to professional financial advice. Rather than leaving individuals to navigate these decisions alone, many employers and trustees facilitate access to advisory firms with the necessary qualifications, a good regulatory record, and transparent and fair pricing. 

Introduce a financial wellbeing provider  

A growing number of employers and trustees are turning to specialist financial wellbeing and retirement service providers to assist employees in engaging with their pensions and savings throughout their careers.  

Watts-Lay underlined the developments in this area, noting that many workplaces and trustees now provide financial wellbeing programs to “help individuals engage with their workplace savings and pensions, understand how to best manage their money, as well as the choices to be made at retirement.” 

By adopting these strategies, employers can empower their employees to make informed decisions about their pensions and build a secure financial future.