Bank scheme lifts contributions through age profiling

Schemes have been urged to use direct and provocative communication to spur saving among DC members, after research showed a quarter do not know what they are saving.

Larger DC schemes such as that provided by the National Australia Group (NAG) to its UK employees are already offering personalised and age-specific reports to members three times a year in order to push up contributions.

Providers have urged schemes to take advantage of such tailored communication and use direct marketing campaigns to increase member engagement.

The Scottish Widows Workplace Pensions Report among more than 5,000 workers.

Among holders of defined contribution (DC) pensions, 28% did not know how much they were contributing to their scheme, and 17% were not contributing anything.

The amount who thought their company pension – as opposed to the state pension or other cash savings – would provide a “reasonable standard of living” in retirement was down seven percentage points to 40%.

And the average proportion of employees who would turn to their employer for guidance in this area was 28%, with this number dropping to 14% among small employers (those with fewer than 50 employees)

Matt Frost, director of Shilling Communication, said schemes needed some way to shock especially younger workers to save more, but to do it with content that was relevant to the individual and their age group.

The consultancy’s work with NAG on its UK DC scheme has already resulted in more than 400 employees contributing more into their pension, out of about 3,000 members, he said.

The NAG scheme now sends out three-yearly reports aimed at contributions, investment and retirement, where before it would only send one annual statement along with the trustee report.

The first statement, in print and email, focuses solely on contribution levels. It gives employees their current contribution and what the net cost and retirement impact would be of lifting it by one or two percentage points.

All these communications are segmented according to the age of the member. For instance, the under-30 version of the second, investment-themed report tells members ‘it is up to you how you play’.

Frost said: “We are being a bit more bold, and a bit more aggressive. ‘Every month you save this, it is being invested, did you know you are in control?’”

In the older age groups, this investment information is geared more towards retirement outcomes and the impact on them of changing the investment strategy.

“It is important that we recognise where you are on your journey,” he said. “If we got these mixed up, it’s going straight in the bin.”

Sparking interest

Peter Glancy, head of corporate propositions at Scottish Widows, said the provider has managed to as much as double the uptake of workplace savings among clients' employees through direct marketing.

“They want advice across the range of their retirement planning needs,” he said. “You need to engage people more broadly.”

This could be in the form of workplace seminars, posters and marketing campaigns to draw employees into their savings literature, such as the retirement model and other savings tools.

But it is crucial, added Glancy, to keep any campaign “relevant” to employees, who have a number of stresses on their take-home income.

Schemes have been warned against simply concentrating on the design of their engagement campaigns at the expense of the content.

There should be a strong message on the alternative to not saving, in order to capture the attention of those 28% of members who are disconnected from their workplace scheme.

And as auto-enrolment looms, according to the Scottish Widows figures, more than three-quarters of those employees who want to be automatically enrolled expect to contribute less than would be required. 

The survey found 34% expected to save as little as £10 a month, and 75% expect to save under £50. Managers need to take an active role in breaking this spell. 

"It's being a bit more truthful that saving for a pension is very difficult, but it is very necessary," said Frost. "As an industry, we need to wake these people up."