Defined contribution (DC) schemes can encourage members to save more into their pensions by highlighting the “free money” available to them, according to Aon Hewitt.
Members, especially younger savers, are more likely to increase their contributions when schemes communicate the additional employer contributions and tax relief available to them.
Speaking at the Pensions and Lifetime Savings Association’s (PLSA) annual conference on 20 October, Aon Hewitt head of DC consulting Sophia Singleton (pictured) said emphasising this can make pensions seem more affordable.
She said: “Affordability is challenging for many members. However, you can help these members through financial education and data management.
“If you explain to members about the free money they can get [from employer contributions and tax relief], they can go off and find the £30-£40 to pay into their pension.
“You can help these people using nudge tactics. We can provide them with tiny reminders that can help them. We need to carry on that message about free money.”
Schemes should also take advantage of the growing capability for automation, and build on the success of auto-enrolment, Aon added.
Singleton said schemes should explore default retirement options for members, as well as increasing contributions in tandem with income increases.
“The theme of automation is absolutely crucial in terms of paying our members,” she said. “There is a deep trust in the pension system and we should leverage that, and automate as much as we can for members.”
Singleton added schemes should also consider the diversity of their membership and provider a greater range of structures and solutions for their mixed membership pool.
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