Engaging members in their pensions has never been more important, although achieving it remains stubbornly elusive for most trustees and employers. Can appealing to a member’s social conscience be the hook we’ve been waiting for?
Despite significant effort over many years, traditional methods to engage members have not, in general, worked. There have been many reasons given for this: too much jargon, too long, too complex, too generic, poor timing, or maybe even inadequate financial education in the general population.
As an industry, we know that we must rise to the challenge, and this will be even more important in the coming years as we deal with the fall-out of Covid-19. According to research from Canada Life, 1 in 10 members stopped paying into their pension pot last year due to being furloughed, made redundant, or needing extra cash to get by. Unfortunately, the impact on retirement income of pausing temporarily is not insignificant. For example, a 30-year-old who opts out of paying into their pension for just three years could see a drop in the value of their pension at age 67 of more than 9%.
So, as trustees and employers, we need to create strategies to encourage members to engage with their pensions, before we can get them to focus on more complex issues of how much they need and what to pay in.
Explosion of activism
We see all around us – in the news, on TV, over social media – the growth of the social conscience. This originally focused on gender issues, race, and climate change, but Covid-19 has also placed a strong focus on social issues in the community and at work. So, can we use this to hook people into thinking about their own pension?
Recent research by the DC Investment Forum shows how strong the desire to do the right thing has become, with 80% of respondents saying they would like the way their pension is invested to do some good. Encouragingly, the research also says that if members knew their money was being used for responsible investment then:
- 65% would have more trust in their pension,
- 67% would engage more with their pension, and
- 50% would contribute more.
Perhaps one of the more surprising findings of this research is that these views are not just held by millennials but were similar across all age ranges.
So how can we put this knowledge to use?
This and other surveys, notably by the NEST Insights team, helpfully consider how to get the most impact when talking to members about their investments:
1. Start with the basics. Many scheme members don’t understand what happens to the money they pay into their pension, so begin by building this understanding. The key point to grasp is that by investing their money in companies the member gets to own a small part of them and, as a result, their money can influence how companies operate.
2. Keep it simple – avoid jargon or technical language. Don’t refer to ‘ESG’, for example, as this won’t mean anything to the average member.
3. Share positive stories about the impact their money is having. To have most resonance make these stories relevant to the member, such as by region or work sector, and keep them real rather than ‘spin’.
4. Emphasise the win/win element of responsible investing to reassure the member it’s helping them personally alongside any wider benefits.
Finally, and most importantly, once you have grabbed their attention make it easy for members to explore other information about the scheme and then take action.
As trustees, we already have duties in relation to ESG reporting and Stewardship and, for certain schemes, climate change. Therefore, if you are already implementing policies on the back of these duties then be sure to tell your members about it.
If you throw your new hook out, you might be surprised how many members it could catch.
This blog first appeared in Pension Funds Insider.