The communication message has arguably been changed as much as anything else in workplace pensions by auto-enrolment.
Getting employees to join schemes is no longer an issue – compulsion takes care of that. And auto-enrolment also brings with it a whole raft of information that the regulations say must be communicated. Get it wrong and HR’s phone line will be jammed with confused and irate employees. But to get it right employers are going to have to completely rethink their pension communication programmes as their staging date approaches.
Neil Strong, strategic consultant at Shilling Communication, believes comms are inevitably rising up the agenda.
He says: “A lot of providers are building it into their plans and schemes are thinking about it more too. But there are different categories. Larger organisations have always valued good communications rather than just standard compliance-driven communications. They appreciate the value of communication to get their return on investment. For others it is on their agenda, but compliance is still driving things.”
But he warns against simply complying.
“ We are seeing a raft of available comms on the Pension Regulator’s site. We are not convinced that will necessarily help. Seven pages of letter that TPR suggests isn’t going to get someone to not want their money taken away from them. We are trying to convince employers of the value of comms. Bad compliance driven comms, will simply be information. The person who receives it won’t understand it. You can bring engagement without it being a faceless piece of paper with text on it,” he adds.
Shilling mainly concentrates of FTSE 350 clients but the firm is developing a more generic offering partly in anticipation of bigger demand but where there may not be time to offer a completely bespoke approach.
Employees still have a choice about their pensions, but the ‘in til you opt out’ system means the question is framed in a different way, Indeed in the new world much of what must be communicated relates to the nuts and bolts of joining or leaving, before employees even get to any discussion about investment choices, contributing more, income choices and the rest. But that doesn’t mean consultants have stopped conveying the benefits of a pension.
Jelf head of benefits strategy Steve Herbert says: “Although auto-enrolment will mean that everyone is ‘in’ by default, this does not mean that the joining communications need to stop. A proactive employer who is actively engaging with offering a pension scheme – rather than mere compliance – will want as many employees as possible to both remain in the scheme, and appreciate the extra value that the scheme offers against others in that sector. So good, effective, communications to reduce opt-out at the beginning will be important in this respect.
“Of course, joining is only a small part of the battle. For most, the legislation-led minimum contribution structures will be nowhere near the level required to produce a successful pension outcome. Communicating this point initially, and on an ongoing basis, will be of huge importance if auto-enrolment is to make a lasting dent in the savings gap,” he adds.
There are a lot of technical requirements that need clear explanation too. Aviva head of policy, corporate benefits John Lawson says: “There is a lot of mandatory change. You can be under the NI threshold and you can’t join, you can between NI and income tax threshold and can join or above income tax threshold and you have to be enrolled. There are three basic categories of worker. If you overlay waiting periods you quickly get
into different permutations of communications that have to go out to workers. You can’t send out information which isn’t in line with that legislation. You are breaking the law if you do. Cancellation has been changed by opt-out. They must come back to the employer not the provider. These are significant technical changes to communication.”
JLT Benefit Solutions director Mark Pemberthy agrees: “For the first time we have multiple pieces of mandatory communication that need to go out at specific times. The challenge is how you communicate that.”
Experts say embracing technology can help significantly and bring down costs. By lining up the right technology to make sure you get the legal requirements correct, it also allows closer targeting and personalisation of messages.
Pemberthy says: “A lot of the communications at the moment are about what is happening and the choices that people have, what action do they need to take or don’t need to take.”
Premier director Martin Thompson says: “In the past, with a lot of organisations, the employee needed to make some effort to find out about the pension. If the employer was looking to promote the scheme it was like a marketing exercise. Now it is a compliance requirement.”
He says for his clients staging later this year the communications are currently about fielding queries and getting people used to the terminology.
“With earlier stagers we are getting people used to the requirements, whether there are postponements, whether clients are using salary sacrifice. The emphasis short term is to make sure it is on track.”
Of course opting out has changed things. Standard Life head of workplace distribution proposition Ann Flynn says: “The opt out journey is all about post-joining communication. How do we convince people opting out is not the best thing? It requires things such as reminding them of the employer contribution. But we also emphasise the pre-join journey. They see it come off the payslip, so if you are wrapping people with really good strong engagement, it helps.”
She points to her firm’s research 18 months ago that showed a lack of awareness, certainly in some demographics, of the employer and government contributions. Standard’s approach is developing a matching tool to address this issue with its overall approach nudging people and emphasising lifestyle implications.
Indeed many advisers and providers emphasise plain-speaking communications. Lawson says this could entail telling people they might be putting away the price of a night out, but translating that into what they might get back, given tax relief, employer contributions and their age.
Thompson adds: “The important thing is that in the bland communications you have to do, you don’t move away from saying it is a tangible benefit. We say the cost to you of putting in £10 pounds means £29 is being invested. The easiest way to do that is in pound note terms. That can get missed, if you use the regulator’s standard notices. It is important to adapt the regulatory notices, so you can still put the right messages in.”
Flynn says: “If you can segment your population using eligibility tools, then you can really target them and we are finding that is the preferred route for many because it stops complexity.”
Almost all experts, providers and advisers divide clients into two groups in terms of enthusiasm.
Paul Gilbody, head of DC consultant relations at BlackRock, says: “Clients are keen to make sure there is more of a conversation about pensions, because for the first time it affects nearly everybody who works for them. They know they need to have an internal conversation around how do we talk to our staff about pensions – is it something we want to promote as a good thing or is it something we casually mention. You can start to see examples of this in the larger supermarkets which have staged already.”
Pemberthy adds: “Some organisations are really starting to think about the employee experience – and thinking about it as a campaign. Good behaviour from some of the early stagers has helped set a high benchmark. It isn’t just theoretical. It is easier to take a different stance when you are seeing other people actually do it.” But he adds that for some cost will always be the trump card.
Thompson explains some employers have an auto-enrolled category or scheme and then have an enhanced scheme which people can voluntarily opt into. With this approach they maintain pensions as a benefit rather than as simply a hygiene factors.
He also believes that the increased focus on governance say, for example, an annual governance meeting, should improve the emphasis on communications.
Gilbody points out that 90 per cent of the requirements to communicate involve the employer, not the provider, even though communicating pensions is not their core competence.
BlackRock’s approach has been to set out clearly the responsibilities in the contract with the employer and that includes taking responsibility for much of the comms for the most part post staging. It will also help with pre-staging if required.
Some suggest that employers’ attitudes are shifting more favourably to the reform as a whole.
Flynn says: “A year ago, employers were saying ‘if there a lots of opt outs then I don’t really care’. Now they are saying I want people to be members of the scheme and they are using contract of employment auto-enrolment to bring people in before staging date.”
Jamie Fiveash, director of customer solutions at B&CE, provider of The People’s Pension says: “The practicalities of operating a workplace pension scheme, especially for employers with a highly transient workforce or with no experience of pensions, can place unwanted strain on employers. Design simplicity is therefore key; making complicated things easy to understand and cutting out the jargon. By keeping the design simple, the charges transparent and the fund choices straightforward we are producing informed and engaging communications that employers tell us are just what they want. We have designed The People’s Pension for the ‘man on the street’: that’s 80 per cent of the UK’s workforce. The majority of people don’t need extensive choice or complex charges structures.”
Fiveash says the firm’s video animations have been a big success.
But he also points out that some employer customers have nearly 30 per cent of their employees who do not speak English as a first language.
“To meet this challenge, in September 2012 we made the employee section of The People’s Pension website available in 56 languages, providing 20 key pages with human translation. We estimate this could help as many as 6.3 million people speaking another language in the UK. As we understand it, this is the first tool of its type and of this breadth, to be launched in the UK financial services industry.”
Indeed Thompson gives both the video and the language service as examples things corporate advisers might incorporate into their comms.
But is there a danger that with so many providers, payroll consultants, and providers that comms become a bit of a mishmash?
Pemberthy thinks it can be an issue. “If you end up with conglomerate auto-enrolment processing you get inconsistent templates, logos, fonts. You lose control of a coherent process. To have it the same style, you need it coming from the same source. You can end up with a Frankenstein approach. It might walk and talk, but it won’t do it as elegantly.”
Herbert says: “On the subject of ongoing communications, all the existing practices still need to apply. It’s important that employees to see if any changes need to be made. From the employer’s perspective it will also be necessary to regularly reinforce the pension offering so that a return on investment from the pensions spend is still achieved.”