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Clik here to view.The introduction of retirement freedom and choice has made effective employee communications an even greater necessity.
The challenge facing defined contribution (DC) members is profound as they try to plan for a happy retirement.
This is where a growing number of IFAs are assisting employers by helping them communicate with their staff. What’s more, some of the more innovative DC and master trust providers have recognised this shift and are being supported by IFAs when producing their member communications.
The combination of auto-enrolment and the rise of the default fund have created a paternalistic pensions attitude. Unless they choose to do so, the need to make investment decisions has been taken out of the hands of scheme members during their working lives.
How to communicate
But that changes in the run-up to retirement. Now that members have the freedom to use their pension pots as they see fit, they face the daunting task of deciding how to use those pots to provide them with an adequate income throughout retirement.
Over the longer term, some of this responsibility may once again be lifted from the shoulders of scheme members with the development of retirement income options. But in the meantime, communications strategies are needed to help scheme members manage these complex decisions and reduce the risk of facing pension poverty.
Current strategies are not fit for purpose. Recent research by the employee benefits consultancy, Lemonade, showed that 60% of the 60 employers surveyed thought their members did not know when they could afford to retire. And 75% thought the member should receive support from their employer to prepare them for retirement.
Forward-thinking IFAs
While many small companies want to help their members with their retirement plans, this can present a considerable challenge. Larger firms, with their greater scale, may have the resources to meet the burden of formulating and providing an effective communication programme, but not all will.
However, smaller firms can get help from their advisers and pension providers. Forward-thinking corporate IFAs recognise this conundrum and are putting increasing resource into helping firms talk more effectively to their staff.
Selecting the right pension provider helps the corporate IFA with this goal. A master trust which takes on the bulk of the administrative burden of pension provision gives an IFA the space to discuss long-term strategic communication targets with their clients.
For member communications to change members’ behaviour, they need to be carefully planned and targeted. These communications need to start long before retirement age.
A member will only be able to afford to retire when they want to – if they contribute enough to their pension throughout their working life.
A well-crafted strategic plan will fail if the pension provider does not offer the right tools. A master trust needs to use all the options at their disposal including direct emails, websites, online accounts and, of course, well-trained staff.
For example, online forecasting and modelling tools are an effective way to show the range of options available at retirement and the benefits of saving more each month.
One-way street
Communication should not be a one-way street. Frequent direct discussion and feedback from members helps to improve communications and ensure that the options available give them the best chance of achieving a well-financed retirement.
The best way to encourage members to talk about the scary topic of pensions is to ensure they can always contact a real person who can talk to them in plain English. A help desk needs to be exactly that: helpful, friendly and informative.
While online tools can be used to show the member the advantage of different investment options at retirement, a conversation with another human being can give often members peace of mind when they are trying to navigate their way through retirement choices.
By working with their corporate IFA and pension provider, small companies have a good chance of ensuring their employees make adequate contributions and make the right decisions to ensure a long and happy retirement.
Bruce Kirton is chief executive at Welplan Pensions