A recent report from the Pensions Policy Institute (PPI) – ‘Engagement Pathways in Workplace Pensions’ – highlighted that, in the UK, we are likely to have ’12 million individuals who are under-saving for their retirement’. A hefty amount of people, who clearly need our industries’ support to get themselves in a good place for retirement.
And what’s more, according to the report, is that one of the reasons for this under-saving actually stems from auto-enrolment.
This is because many of those who are automatically enrolled into their pension typically stay at the minimum levels of pension contributions, even though this level is unlikely to be enough for an adequate retirement. In fact, the report details that ‘research has suggested that a minimum contribution level of 11% would be required to achieve target incomes in retirement for three quarters of people, based on saving from age 22 years continuously until retiring at the state pension age’ – meaning employees need to be saving more than the minimum levels set by automatic enrolment.
The report goes on to explore four typical pension personas; for each one, it shows what drives their lack of engagement in their pension savings and retirement. And the persona that really struck a chord with me, was what the report calls ‘threshold adults’. Perhaps because, when reading it, there were a lot of home truths about my own pension behaviour.
So, who are these ‘threshold adults’?
The report defines ‘threshold adults’ as a group of folks who do ‘not consider themselves to be fully-fledged adults’, even though ‘they had some of the markers of adulthood’. Typically, they view saving for retirement as something to engage with once they feel ‘fully established as adults’, and in the meantime, they are ‘comfortable paying low or no contributions, even if they could afford more’.
And what made me have a wee laugh, was that even though this group represented people who were up to the age of 39, they still used phrases like ‘not a proper adult yet’ when they were justifying their reason for not engaging with their retirement savings more. When reading this, I could completely identify with this phrase. As I must admit that I too, really struggle with accepting the fact that I’m a fully-fledged adult, complete with grown-up responsibilities.
Of course, as a lover of comms and engagement, this got me thinking about pension communications and how we can better engage with these ‘threshold adults’.
And one answer has got to be leading with what matters to them now – so other “financial adulting” type things like budgeting, bills, debt, mortgages etc – which is something that our ‘It’s Time to Change’ research report found.
Indeed, our research showed that one reason why pensions are not a priority is because ‘now matters more than then’ – and, for many, there are just too many other competing financial priorities to deal with. 50% are paying off a loan or credit card, 30% regularly use an overdraft and 45% of people have financial dependants to support etc... meaning pensions simply get pushed out the equation.
Tackling existing priorities to get people saving
So, to effectively bring pensions into the equation, we must first tackle existing financial priorities so that there’s then the ‘headspace’ to tackle and engage with pensions. So, for example, with our ‘threshold adults’ we can first help them with other “financial adulting” type things like budgeting, bills, debt, mortgages etc. And then once we’ve helped them with these, we can then bring pensions into the equation, because, at that point, they’ll likely be more receptive to engaging with their pension saving, because they will be further along their ‘adulting journey’
And, in fact, the PPI report did actually comment that ‘threshold adults may need interventions that recognise the challenges they face in feeling established enough in their adult lives to prepare for the future and offer support. For example, specific pension notifications could be linked to establishment goals such as having children or buying a house’.
So I think it’s safe to say, there’s lots of evidence from these two different research reports that stress the need for better financial education – and this is why we’ve worked with the Money Charity to develop a series of financial wellbeing workshops which tackle typical ‘financial adulting’ topics. And it’s also why our MyAspire platform takes a holistic financial approach to workplace engagement – you can read more about that here.
If you'd like to discuss how we can help your employees 'get adulting', click here to find out how we can help you.