UNENGAGED MEMBER
Nico has been with the organisation for a few years but is still very unengaged with his pension.
UNENGAGED MEMBER
Nico has been with the organisation a few years now but is still very unengaged with his pension.
When Nico first started at the organisation, he was enrolled on the minimum pension contributions, didn’t choose to pay in more due to his other financial commitments, and hasn’t paid too much attention to his pension since. Nico has recently reached out to you with some questions around how to start managing his pension.
Pension engagement Your company pension can form an important part of an employee's total reward package. Understanding how your employees are engaging with their pension is a valuable tool to support them with their retirement goals as well as support attraction and retention. Your pension provider should be meeting with you on a regular basis to discuss your scheme’s performance, which can include an overview of your employee pension engagement. Here are some measurable actions for you to be aware of that can help employees like Nico begin to engage and manage their pension:
1. Online Access
This is the first step to giving employees more control of their pension. You should be aware of what the process is and then once employees have access, they can then easily check details about their workplace pension. Eventually this will reduce pension inquiries coming your way, saving you precious time. Your pension provider should have a strategy in place to get as many employees registered online as possible. 2. Monitoring
How frequently your employees check their pension is a good indicator of how they value their pension. Nico may register for online access but then never log in to check its performance. Making sure your provider is regularly reminding employees to log in and check their pension is important. This can help minimise the risk of employees not achieving their retirement goals, in turn helping to increase employee wellbeing.
3. Transferring a pension
If your employees have expressed an interest in pension consolidation, your provider should be able to support with the transferring of old pension pots into your current scheme. There are many tools available to help employees track old pensions like the government’s Pension Tracing Service. Employees should make sure each they check for loss of benefits or guarantees as well as any excessive exit fees before transferring. Signposting tools like this will remove the need for you to explain the process. Your current provider should have communications in place to support employees like Nico in transferring their pension. When an employee has one pension pot to focus on, the overall value is more visible and will help encourage them to manage their retirement savings.
What does Nico need to consider?
Firstly, Nico should get online access to review his current pension pot or any previous pots he may have. Depending on his retirement goals, Nico then may need to increase his monthly contributions or look at additional savings accounts to increase his future saving pot.
4. Contributions
There are many employees like Nico who were enrolled on the lowest contributions possible during the early stages of their career who have never increased them, commonly due to their pension not being high priority at the time. Your pension provider should be working with you to demonstrate the value of increasing contributions over time and the impact this has on the employee's overall pension pot. There are Pension Calculator tools available to help employees identify how much retirement income they might receive, based on their current contributions. You should remind employees that they are normally unable to take money out of their pension until at least age 55 (57 from 2028).
What do you need to know?
It is important to check what engagement results your current pension provider can provide. You can then measure how engaged your employees are overall with their pensions and work with your pension provider to improve the engagement in specific areas.
5. Additional Accounts
Employees may be looking for additional ways to save and invest. These additional accounts should be easily accessible for employees with sufficient information for them to make their decision. You could suggest employees like Nico look at these options if they are looking for alternative ways to top up their savings and investments. For example, they might want to consider using an Individual Savings Account (ISA), especially if they face restrictions on how much they can pay into a pension. See more information in the Higher Earner section.
6. Expression of Wish
Employees are encouraged to complete an Expression of Wish form allowing them to nominate the person or people to whom they would like their pension pot paid in the event of their death. This is not legally binding, but gives an indication of their wishes and can help avoid complications during difficult times. Your pension provider should be monitoring the completion rate of this form as it demonstrates how employees are planning for the longer-term. 7. Investment Choice
Once your employees are more engaged with their pension then they may feel confident enough to start making their own investment choices. Investment choices will be explained in more detail in part 3 of the pocket guide coming on 7 June.
Guidance
To help Nico in this situation, you could suggest he registers for online access and uses the Pension Tracing Service to locate any old pensions. Then, once he has a clear overview of his pension value, you could work with your pension provider to discuss how to increase pension engagement with employees like Nico. Read our governance section to find out more.
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