Three big ideas for better member engagement

Policymakers and the pensions industry have taken advantage of members’ lack of engagement with retirement saving to great effect in recent years, with auto-enrolment ensuring that nearly 10m savers have been newly brought into the pensions regime.

Their investment decisions have also been largely taken out of their hands, with 99 per cent of members saving into their default strategy in accumulation.

But the UK defined contribution system still leaves consumers responsible for a number of key decisions.

With no plans currently in place to raise minimum contributions above the insufficient 8 per cent, a generation of savers may need to take responsibility for their pensions adequacy.

Similarly, retirement decisions pose a significant challenge to members who, despite their low average level of financial education, are unwilling or unable to pay for independent financial advice.

That means the pensions industry cannot afford to give up on engagement, according to James Walsh, policy lead on engagement, EU and regulation at the Pensions and Lifetime Savings Association.

“Saver engagement is vital to ensure people understand the value of retirement saving and continue to stay opted in,” he said. “Auto-enrolment is a real step forward, but savers do need to know if they are on track for the lifestyle they want in retirement.”

In light of this ongoing role for engagement, the PLSA last week asked three experts to pitch their ideas for better engagement to pensions ‘dragons’.

Their pitches were assessed by judges Mel Duffield, pensions strategy executive at the Universities Superannuation Scheme, Patrick Heath-Lay, chief executive officer at The People’s Pension, and Rene Poisson, chair of the JPMorgan UK Pension Plan.

Comments have been lightly edited for clarity and continuity

Member movies spark engagement

Francis Goss, chief commercial officer at AHC, advocated a Future Freedom Toolkit – an app allowing members to create and direct their own later life movie, turning a ‘stand-offish Steve or Steph’ with little knowledge or interest in pensions into an engaged member.

Steve arrives at work in the morning. He is just approaching the lift and he sees a banner; ‘Ever imagined what you will do with your life after work?’ – “can’t say I have,” he thinks.

He arrives at his desk and waiting for him is a cinema ticket inviting him to go on and build his personalised film trailer.

What does Steve want to do? He has never really considered or thought about what he wants to do with his future freedom. He knows that one day he said to his brother, “I’d like to start a business, that is what I would really like to do. I would love to run the New York marathon, and I would love to go to a world cup final” – that is an ambition that most of us have. He simply clicks on ‘create my film trailer’.

Steve, for the first time, is thinking of his future freedom – he is engaged.

He is then encouraged to go onto the toolkit and interact with the multiple tools there that help him to prepare for his future freedom: an option to learn about money, a very simple modelling tool, a ‘cost to you calculator’, savings modeller, and even a ‘save more tomorrow pledge’. Finally, there is a savings mentor, sending him savings nudges like a personal gym to keep him engaged in his savings.

He has never understood the cost to him versus what is invested. He never realised that it just costs £42 for £150 to go into his pension. He has been told that because he has gone onto a simple modelling tool and played around with the various levers on it.

Finally, he decides to sign up for a ‘spend and save’ card. Every day he makes savings as he spends, and his savings go into a pot for his future freedom.

He is suddenly realising that it costs him £42 to put £150 in – this is like free money.

He now believes that retirement savings for him are relevant, they are understandable, they are beneficial, they are a brilliant way to save for the future and he is not going to opt out now. He has also pledged to make an extra contribution on his birthday because he has worked out that the value of that will grow over the years.

The judges’ view

Mel Duffield: One of my challenges would be around two words: delayed gratification. I can see that you have tried to address that through some of the ‘spend and save’ initiatives. But is there also a big reality check here – when he puts his aspirations in and he does the cost calculator, he is actually going to find that his savings fall quite far short.

Patrick Heath-Lay: The visualisation for retirement is fine, but many people have different aspirations. How are you going to keep that fresh, so that there is something related to the individual they can grasp? It was an interesting pitch, but I did not hear how you are going to get the consumer engaged in the first place.

Make millennials proud of social impact

Vincent Franklin, co-founder of Quietroom, pitched a rebranding of master trusts to highlight their investment impact on society to younger members.

There is no group in society more interested in the future than young people. Sixty-two per cent of millennials want to make a positive difference to the world. Eighty-eight per cent of them say they find their job more fulfilling when it gives them the opportunity to have a positive impact on social and environmental issues. They are really interested in the future, they are just not interested in a future that we say does not start for 40 years.

They want to see how they can change the world. The great news is that we are perfectly placed to show them how we are doing that in master trusts. Master trusts are doing the sort of things that these people want to do all the time. Master trusts are building businesses, creating jobs, putting in infrastructure, trains and roads, they are building new ways of powering the world.

But we cannot get these stories across. We cannot penetrate the wall of indifference and there are a number of reasons for this. Firstly, they do not know that their money is invested in real things. Secondly, because nobody understands what a master trust is, that does not make me feel powerful.

We need to be telling these people that by taking that bit of responsibility they have got great power. They have come together with lots of other people to create a very powerful instrument for change.

However, we are never going to get these messages across while we call them master trusts. What is a master trust?

If we had a better name that helped connect what we are to what we do, and why that matters, young people who want to change the world could now be told, ‘Yes, you will be wealthier in 40 years’ time, and in the meantime your money’s going to be doing amazing things around the world’. That is a much easier sell.

I am not going to tell you what we should call it. I am offering the industry the opportunity to decide what we are going call it. It would be a really, really cheap change.

It becomes a thing we celebrate, that brings the benefits forward and engages the people who want to change the world, in other words the young people we are failing to talk to.

The judges' view

Rene Poisson: A masterly exposition of the problem, but actually no solution as yet. You have dumped the solution for everyone else to decide. I understand the problem but I am not sure yet that I have the solution to invest in.

Mel Duffield: I have got some concerns about your evidence base here. The survey results, if you flip those on their heads that suggests that 38 per cent of millennials do not want to make a positive contribution.

They say they are interested and that is a survey result. My scheme has got quite concrete evidence of members saying they want something and they do not do it in practice.

Ditch the DB paper comms

Marian Elliott, managing director at Redington, argued that defined benefit schemes should waste less time and money on paper communications, focusing on using technology instead.

Marian Elliott, managing director at Redington, argued that defined benefit schemes should waste less time and money on paper communications, focusing on using technology instead.

DB members want to engage with their pension scheme at three key points in their lives – when they are considering whether to take a transfer value, when they are deciding on their options at retirement, or when someone close to them has died. There is also a need to communicate with them in times of crisis, such as when the employer has failed. In none of these circumstances is a piece of paper the best way to communicate with those members.

Every piece of correspondence we send out should go through a plain English review to make it suitable for what is an average reading age of eight to 12 years old. It is also well known that people engage far more with video content than written content, but what you might not know is that this stuff is not expensive. You can spend less money sending out really simple compliance correspondence on a single piece of recycled paper and use an online tool to target information about people’s benefit statements.

At the BAA Pension Scheme,13000 out of their 17000 members have gone online and visited that site. Half of them actually watched a 10-minute Q&A video with the investment consultant.

I am asking you to stop spending any money on the stuff that goes in the bin. Make it simple, keep it cheap, go digital as far as you can, make use of smart technology to keep your costs down, and what should you do with the savings? – administration, administration, administration.

The number one thing that DB scheme members said they cared about was their pension in their account at the end of every month. You can make sure that happens by thinking about your funding and investment strategy.

Finally, embark on a communications campaign with your sponsor. An engaged, well-informed sponsor who understands the drivers of your pension scheme is one of the biggest assets your trustee board can have. I would urge you to think about spending some of that money on how you communicate in a way that is meaningful to your sponsor.

Spend less on the paper. Get your administration, your strategy, and the engagement with your employer right. In summary, it is all about people, not paper.

The judges’ view

Rene Poisson: As an offer to save my money it is really interesting, although I am sure you would be spending quite a bit on a comms campaign. I am just interested in how this fits into the regulatory compliance and how are regulators are going to feel about scrapping all that paper?

Patrick Heath-Lay: In schemes that are largely closed and in effect in run-off, what is the hook that is going to get to deferred members, particularly on the administration angle? How are the sponsors of the scheme going to get deferred members to actually drive in to that communication? It is a more efficient route, but what is the hook?