Talking to members about savings and the cost of living crisis

In January, the Pensions Regulator issued guidance urging trustees to support defined contribution savers during the cost of living crisis. While their guidance is welcome, a one-size-fits-all approach rarely works and the approach for individual schemes is nuanced and complex. 

Broadly speaking, responses can fall into two distinct camps. There are good reasons for each approach.

Choosing not to communicate with members

For those who have been automatically enrolled, not communicating might be the best route. According to the Pensions and Lifetime Savings Association: “Only around one in 10 schemes surveyed said that they have seen members wanting to opt out.” 

Opt-out rates do not tell us the whole story, but we are also seeing reports that cessation rates are rising across the industry as the cost of living crisis bites

What we do not know is what is driving this behaviour. Perhaps members are managing and value the extra money that their employer pays into their pension. Or maybe (and arguably more likely) we are seeing the effects of inertia – members simply are not aware of their options. 

Choosing not to communicate with members might keep their pension savings, their employer’s contributions and any investment returns safe from interruption.

Opt-out rates do not tell us the whole story, but we are also seeing reports that cessation rates are rising across the industry as the cost of living crisis bites. 

In February, consultancy LCP reported that “half (51 per cent) of employers said employees had requested to reduce pension contributions in the past year”.

Like opt out rates, we do not know exactly what is driving this behaviour though, and while surveys are helpful, they do not always tell the full story. Individual schemes will be best placed to dig a little deeper to understand member behaviour. 

But, for members who are aware that they can stop their contributions, and by that measure appear more engaged with their pension, perhaps the better option is to talk to them about their options. 

Choosing to communicate with members 

In light of the cost of living crisis, the PLSA encourages trustees to, among many other things, “strengthen your member support capability and target your efforts towards those most affected and in need of help”.

It also encourages trustees to “guide [members] through the trade-offs that they will need to make and the risks involved”, and to “monitor member action/inaction and adjust and evolve your engagement plans accordingly”.

Schemes may choose to tell members that they can offer a “contribution holiday”, or explain to members what they will be missing out on if they do choose to stop saving. Either way, the rising costs of living show no sign of relenting. So, whichever camp you fall into, it is worth considering how you can make the best of a bad situation. 

Here are three suggestions:

1. Find out how your members are feeling

Understand what is driving their behaviour. Do not assume you understand what they are going through. Every time we test a communication on members we are surprised by the insight it provides. There is always something that research throws up that we had not considered.

Ask members what they understand about how their pension works: do they know about the employer contributions? Do they know that their pension savings are invested and therefore why it is so important to keep saving for the long term? Ask them where they go for trusted information. 

All of this will give you valuable insight when you then design what and how you will communicate with them. 

2. Test, refine and test again

Put your communications in front of real members. Ask them what they think, test different communication routes, focus on how the communications make them feel and what they understand. Rewrite your communications with all of this in mind. Then, test again. Repeat until you have got it right. 

There are many ways to do this quickly and efficiently while gaining valuable insight.

3. Make sure you are set up to answer any member questions.

Do not communicate into an abyss – putting a message on a website that no one knows is there is not enough. If a website is your key communication channel, make it easy for members to find what they are looking for. Better still, ask members where they usually go to find answers. For example, do they rely on social media, do they respond to emails that you send out, or do they call your helpline? Find a way to go there. The chances are that if you do not, the scammers will. 

Check that the teams who can help members are geared up to help. What can you give them to make sure they are all singing from the same hymn sheet and ready to help as quickly, empathetically and efficiently as possible?

Whatever you choose, evolve as you go. The more you understand your members’ needs, the more effective your communications will be. 

Cath Collins is a senior writer at Quietroom