Picture the scene. It’s Wednesday evening, the sun is still shining, and some friends have come over for a mid-week barbeque. The fire is going, wine is flowing and the conversation suddenly turns to pensions. Not your average topic for four people in their twenties; at least not in my experience.
One friend had noticed a poll I posted on social media the day before:
‘Last month, the minimum percentage that employees need to contribute into a pension plan increased…what have you done? Increased contributions, or stopped contributions?’
It’s fair to say that this had prompted him to panic. Within seconds of me posting the poll, and that’s no exaggeration, I received a message from him with some expletives I won’t repeat here. Essentially, he had no idea about the increases to automatic enrolment contributions and, after giving him a vague summary of what this involved, he had decided to send a panicked email to his HR Department. As it happens, he was paying over the minimum anyway and was in fact receiving a generous monthly contribution from his employer.
However, he was still confused when he arrived at our house the next evening. We discussed the basics for about ten minutes, until our respective other halves’ clear disinterest prompted us to change the subject.
After the fire was out and our friends had headed home, I decided to see if any other responses had come in. My friend’s reaction tallied with a few other comments I received and, lo and behold, another friend admitted he had not known about the increases until he saw my poll and checked his payslip.
By the time the poll closed a few days later, 91% of the people who responded stated they had increased their contributions. One friend was happy to make the increase as he had recently received a pay rise, so he wouldn’t feel the effect, and another was happy to pay more in due to some sound advice he had received from his father. Good work Dad.
Only one friend mentioned communications from their employer as motivation to roll with the increase. She had seen a poster at work saying the contribution basis was changing, and had decided to reduce the amount she put into her regular savings account, and divert it into her pension, as a result.
It appeared that most of my friends were fairly financially savvy, and understood on a personal level that higher pension contributions would benefit them in later life. However, it also became clear that communications about the increase had been an issue for many people.
Although choosing whether to increase or stop pension contributions is ultimately a personal one, employers can play a huge part in this decision. HR heads may be wary of accidentally straying into the ‘advice’ danger zone when discussing pensions with their staff; however, it is possible to provide strong internal communications and financial education without crossing this line.
By the time the next set of increases comes around in April 2019, I’ll be interested to see if any of my friends’ employers have changed their stance towards pension communications. As millennials (yes, that dreaded group), we may perhaps feel the pinch more keenly than most. I’m lucky enough to work in an industry which allows me to grasp the fundamentals of the complicated beast that is pensions. I can only hope that friends working in different sectors receive enough clear educational material from their employer to allow them to feel informed by the time April 2019 rolls around.
My other half would certainly hope that this is the last barbeque we host where automatic enrolment legislation is discussed in depth. Time will tell.
Topics: Friday Fun