It’s not very surprising, but is always disappointing when you hear it. Employees don’t understand or value pensions. There, we’ve said it. Not too hard was it? The extent of the lack of understanding though is hard to get your head around. Some research that Aviva has undertaken with employers asked lots of questions about employee benefits. We spoke to HR Directors and Finance Directors, as well as business owners, and we made sure we asked businesses of all shapes and sizes, just to ensure we got a balanced view. Outcome and messages were the same – employees don’t ’get’ employee benefits.
The easy thing to do now would be to look to find the cause of this and to start blaming things left, right and centre. But I’m not convinced that will do us any good. We really have to put ourselves in the shoes of the employers and employees and really get to grips with how we cancommunicate the benefits in a better way, using language that we all understand. Until we’ve done this, just adding more choice seems to be wasted effort, doesn’t it?
If we take this up a level, and consider the position of the adviser, and then the product providers, we need to assess what the state of play will be when the Retail Distribution Review comes in, and when the raft of Pension reforms hit, in particular auto enrolment.
In a post Retail Distribution Review world, helping an employer with a new scheme, or looking to upgrade the current scheme, is going to take us into either a fee arrangement, or into a Consultancy Charging arrangement. Combine this with auto enrolment, and the need to clarify the
value add becomes clear.
From an employee’s perspective, the need to clearly communicate the real value of a benefits package becomes even more important when that employee has not made a positive choice to join a pension arrangement. Auto enrolment has done its job. The employee has apathetically joined a pension scheme. In and done.
So what can we do to really help that employee understand the value of the benefits package, and ultimately save their retirement by preventing them from opting out? Surely we need to think again about standard communication methods and decide whether they really are fit for purpose.
We know that NEST is looking at using innovate language (for innovate, read simple), that translate pensions into English. Bravo. The work that NEST hasdone is heavily research based, so can be taken to be a great guide of the level, or lack of understanding of pensions in the UK. So let’s embrace what NEST has done and use the language that they’re proposing. The dictionary will be out in January. My question is how long will it be until we all start to use what will be offered to us?
So if we can simplify the language, can we then sort the communication delivery method? Paper packs are, according to our research, heavy, unhelpful and difficult to navigate. Oh, and the research was across employers that have arrangements with a range of providers, so no single
company is being picked on. Platforms are very useful, but let’s not over complicate what we want the platform to do. It’s there to facilitate engagement.
The early use of technology in the workplace was around flex. A fantastic tool, particularly where an employer had the resource to be able to manage it. But whilst a great door opener, the take up was limited. So why not use the most valued parts of flex, and distribute this more widely, and by widely I mean to smaller employers with less than 1,000 employees?
Our research shows that Total Reward Statements would be valued by employers of all shapes and sizes. The simplicity of showing a benefits package in a pie chart is wonderfully appealing, and given that there is a print option, can work well whether the employer uses technology or not. I use my brother’s business as a sense check for this. He runs a small engineering business with 23 employees.
It’s fair to say the employees aren’t in front of desktop computers all day. For him, the print option helps to do a good job.
If we can combine effective use of Total Reward technology, and then get the paper delivery right as well, we can sort the basics of the benefits package to enable the employer to demonstrate the value of the investment being made into employee benefits.
Because let’s be clear, until we get the basics right, even thinking about delivery wider saving to a mass audience through the workplace is a pipe dream, isn’t it?
Paul Goodwin
Head of Pensions, Aviva