Get engaged with staff

The approach of personal accounts means employee engagement in pensions is now as important for advisers as it is for employers. James Phillipps checks out the latest thinking on how to get staff to connect

Engagement may sound like the latest management-speak fad but it can help companies to boost productivity and reduce staff turnover. What’s more, if advisers want their clients’ workforces to value their pensions over personal accounts come 2012, then engagement is key.

Far too many companies are content merely to dump a pensions handbook on new employee’s desks without explaining the true value of the benefits packages they offer.

Trevor Rutter, a communications consultant at Mercer, says: “Pensions are the most expensive benefit companies offer to their employees, but are probably the least valued. But, statistical evidence shows that where benefits packages are well communicated, employee satisfaction levels are boosted. This leads to a better motivated workforce and higher productivity is a natural follow-on from that.”

A study by Mercers found that employee levels of satisfaction with their benefits packages increased almost fivefold where the employer’s communications were highly rated. (see box). Admittedly, engaging staff about their pensions is not easy, because, put in plain terms, most people find the subject dull.

Philip Hutchinson, head of corporate Sipp sales at Pointon York Sipp Solutions, says the key to engagement is to ensure employees have a perceived value of the benefits provided for them.

He says there are two main obstacles to overcome in achieving this. “The initial barrier is getting people to hear what you are saying in the first place and the second is, if they do listen to you, to make sure that they understand the message.”

Rutter agrees, saying that in order to get their message heard, companies and their advisers need to ensure that all communications are “relevant, timely, targeted and simple.”

Face-to-face meetings with staff will nearly always yield the best results, he adds, but where this is not possible employers have to ensure their communications are read.

One increasingly popular, and at times, rather blunt tool is the total reward statement. These are particularly useful for companies offering flexible benefits packages as the company’s total spend on the employee, including salary, pension contribution, life cover and so forth is laid out in black and white.

Mark Smith, a senior consultant at Lane, Clark & Peacock says: “Total reward statements put a much clearer value on the benefits package offered and help the employee choose which of those benefits are subsidised. It also makes it easier for the company to tell the employee how much they have spent on them.”

It also reminds employees what entitlements they have and that the salary may be the headline figure they consider but is part of a wider benefits package.

Ian Luck, a director at Smith & Williamson Financial Services says there is anecdotal evidence that total reward statements can reduce staff turnover.

Luck says they should be delivered both as a paper statement and online. He says distributing them twice yearly will improve engagement as employees will be able to keep a better track of how their pension is performing. “A lot of larger companies have introduced total reward statements, but increasingly small and medium-sized businesses can afford to run flexible benefits and communications systems,” he says.

Employers that do not offer total reward statements have to be that bit more creative. (see box) Experts recommend companies use a variety of media to try and engage employees. Hutchinson says as a core method of communication, benefits statements should be sent in white envelopes marked ‘private & confidential’.

“People get carried away with the internet and email when actually you need to use a variety of media,” he says. “If you send it in the white envelope you can guarantee everyone will read it before they even switch their computer on because they will think it is either a pay rise or a P45.”

Aon Consulting head of DC Helen Dowsey agrees there is an over-reliance on company intranets. After an initial burst of activity, use of the site typically wanes, she says, so employers need to maintain interest through hard copy communications and regular email reminders. The phrasing of these communications varies from firm to firm, but several advisers actively seek to avoid using the word ‘pensions’.

“The word pensions does not have a good vibe around it,” Hutchinson says. “We talk about wealth creation and how we can help you take the money you have already earned and give you the choice and control to plan for your future.”

This is much easier to pitch to higher-earning and more investment savvy people, he concedes, but more difficult a message to get across to low-earners, particularly younger individuals, who lack disposable income.

Dowsey uses a similar approach, but at a lower level, preferring to refer to pensions as ‘savings’ to try and encourage employees to think about their finances and engage in the savings culture.

To meet Rutter’s ‘relevancy’ test, many employers are now starting to segment their workforce to enable them to better target their communications, whether by age, salary or location.

Luck says: “Segmentation is still in its infancy, but even at a basic level, it is easy to see that people at a younger age are attracted to different imagery than people nearer retirement.”

The classic example of this is to consider which of these age groups is more likely to associate themselves with the oft-used pictures of a white-haired couple happily meandering along a beach hand-in-hand.

“It does not matter how glossy or award-winning your handbook is, because if people do not think it is relevant to them, it will end up in the bin,” Rutter adds.

He says that in the age of digital printing it is not difficult to produce handbooks and regular newsletters with different content aimed at different segments of the workforce.

Hutchinson stresses that articles targeted at younger employees should, however, avoid over-emphasising the negatives of not saving for a pension for fear of alienating them.

He says: “Scaremongering does not take into account individual circumstances. If people have big credit card debts it might not be right to frighten them into putting all of their money into a pension.”

Smith echoes this. He says: “If you emphasise how poor they will be in retirement it will only ever have limited success because it still relies on the employee acting on that information.”

The best practice is to encourage them to contribute as much as they can, he says, even if this is only a small amount in the early years.

Hutchinson is an advocate of nursery schemes, where employees need only contribute a small percentage of their pay in the early years to get a matched contribution from their employer. This can be staggered to manage affordability, for example, with graduate recruits.

Dowsey says personalised projections and communications can be very effective at encouraging young people to enrol into their occupational scheme.

She says: “This can be done by simply telling them after a year how much they have given up in pounds by not joining the scheme.”

Although younger people may be the most difficult age group to engage, this is not to say other age groups are always responsive.

“It is hard to put a date on when you wake up in a cold sweat and there are still a lot of people in their 40s and 50s living in denial,” Rutter notes. “People think they will be fine but have not thought through how they will manage.”

Financial education should be viewed as an important benefit by companies, Smith says. He adds that he has seen a large increase in demand for mid-career counselling.

“It used to just be pre-retirement counselling, but now we are seeing a lot of people in their 40s, particularly City workers who want to retire before they are 65 and want to make sure they are on track,” he says.

There are clearly advice needs throughout the age spectrum, which throws up plenty of opportunities for those corporate advisers that convince their clients of the benefits of being seen as an employer of choice. n

focus: Philip Hutchinson, Pointon York Sipp Solutions

Capture the imagination

With a bit of imagination, campaigns to improve take-up of occupational pension schemes can be highly successful. The nature of the employer’s business and the demographics of its workforce can be pivotal in deciding how best to engage staff. Philip Hutchinson, head of corporate Sipp sales at Pointon York Sipp Solutions, says one new client, a Newcastle call centre company, paid a 10 per cent employer contribution but had zero take-up. “The majority of its staff were students in debt, so anything with pound signs on, like the pension handbook, went straight into the bin,” he says. “We rewrote it in plain English and ran a competition that asked them questions based on the new handbook. The winner was given beer money for the weekend and take-up of the scheme rose to 80 per cent as people took notice of the value of the benefit being offered to them.” Companies with similar workforces have successfully used podcasts and DVDs to engage younger workers. More generic campaigns for companies with a more diverse range of employees can also be successful. Mercer has run campaigns with the message ‘Your company wants to keep paying you even after you stop working for them’.

Communications consultant Trevor Rutter says the campaign used posters, online and leaflets to reinforce the message and it captured employee’s imagination. Another successful campaign sought to use real life parallels by pointing out that employees will happily spend a couple of hours online to save a hundred pounds on their car insurance or a flight but do not pay the same attention to ensuring they get the maximum out of their companies’ benefits package. “Keep it simple and make it more human,” he says. “They don’t need to know how a pension works, they just need to understand the importance of the benefit being offered to them.”Capture the imaginationHelen Dowsey: There is an over-reliance on company intranets