Mind over matter
Sunday, March 25, 2018.
That’s an important date for me. It’s the day that the clocks change this year.
And that means it’s the day when – theoretically -- I start cycling to work again (OK, technically the next day).
I say “theoretically” because past experience has shown me that if I don’t spend months beforehand psyching myself up, it doesn’t happen.
After months of driving to work, I need to start telling myself now how much I want to fit into last year’s best suit again. I need to really feel lazy and unfit over Christmas. And I need to go for a few short rides in February so that I begin feeling the benefits, and want more.
Even then, it takes a couple of weeks after the clocks change until I willingly get up early to ride to work. And there have been years where I’ve fallen at the first hurdle.
My point is that when it comes to exercise (and don't forget diets!), bad habits take considerable work to break.
Actively changing your behaviour to do something unpleasant – even if beneficial – is a big ask.
Changing financial habits
Getting people to save more into their pensions takes just as much hard work. In some ways, getting people to take money out of their pocket today to benefit them in 20, 30 or 40 years’ time presents an even bigger challenge to your overall employee engagement strategies and takes even deeper persuasion techniques.
In fact, there’s an entire field devoted to studying what it takes to get people to change their financial habits, called behavioural economics.
Yet as an industry, we don’t seem to get this. Too often, we behave as if getting people to save more is just a question of notifying them of their options, rather than the more complex problem of changing deep-seated behaviours.
Here’s a timely example: Just a couple of weeks after I begin cycling to work this year, the portion of pensionable salary your employees have to put into their auto enrolment scheme could jump from 1% to 3%. This doesn’t sound like much, but if you’re on a low salary and money is tight, and then your pension contribution triples overnight, you may be tempted to quit your scheme, right? 12 months later, employees could face another hike, when their share of the total minimum contributions required could go up to 5%. And yet, most companies are treating this change as if it is a technicality.
Before Christmas I met with an HR director who told me that his grand plan to prepare his staff was to include a reference to the legislation in his March newsletter. From what I see, he’s fairly typical. But this is just the tip of the iceberg of what it will take to prepare staff for such a drastic rise in contributions over the next 16 months, and to persuade them that the short-term hit in take-home pay is worthwhile.They really need to believe in the fundamentals of pension savings if they are going to stick with their pension plan.
Incentivise workplace savings
I fully understand why many companies don’t take a more ambitious approach. Figuring out how to change behaviour rather than “developing a communications plan” is a challenge which you probably have neither the time nor the resources to tackle. But it doesn’t have to be that way.
I’ll talk about that some more next week. And believe me, if I can be persuaded to get up at the crack of dawn to cycle to work, anyone can be persuaded to do anything.
Topics: Next Generation Savings