A chef is hard at work in a busy restaurant. Beside her is a tiny replica of herself – a “mini me” – who helps our protagonist slice, stir, taste and tidy her way around the kitchen.
“Having a workplace pension is like having another you, at work,” the narrator tells us, “helping you earn money for when you retire.”
NEST is, of course, the Government-backed DC pension scheme, which was launched to facilitate auto enrolment as part of the Government's workplace pension reforms under the Pensions Act 2008.
Soon after the first companies automatically enrolled in 2012, it was clear the scheme was an extraordinary success. In its first year, around 1 million workers from big companies were brought into the scheme, according to The Pensions Regulator. The number rose to 6.2 million in 2016 and hit 10 million by the time that advert appeared.
The scheme has felt like an arm around the shoulders for British workers – or, as the ad says, “another you...helping you earn money”.
Another arm around the shoulder
The Government has not been alone in pushing us to think about our pensions and retirements years before we retire. Since November 1st, 2019, the Financial Conduct Authority (FCA) has joined the effort by compelling pension providers to issue “wake up packs” to savers on their 50th birthday and every 5 years thereafter.
These must include a generic warning on the risks around accessing a pension pot and providers are required to send wake-up packs at various trigger points – their 60th, 65th and 70th birthdays.
Again, this has felt like an arm around the shoulder and a vast improvement on the old way when people would get to six months before retirement and a pack would drop through their letterbox. It would tell them how big their pot was and illustrate how much they would have to live on in retirement. But six months in advance of retirement is, of course, too late. You can’t take ownership of the issue in any meaningful way with just a few weeks to go.
So that’s where we’re at: the Government has created the conditions for people to pay into pensions automatically and the pensions providers are engaging people much earlier in what to expect in retirement. But what about the workplaces?
It’s time for employers to play their part
Even in these more enlightened times, most workplaces are not particularly involved in this national effort to provide retirement guidance.
Yes, you usually receive induction packs when you start a new job – but there is unlikely to be guidance around your pension contributions and what they mean.
Every month, employees up and down the land see the pension deduction on their payslips but most workers wouldn’t have any idea whether they were saving enough.
I don’t want to be too negative. The more staff-focused companies will sometimes offer seminars to colleagues approaching retirement – maybe two years in advance.
At these events, retirement consultants, often parachuted in from the company pension provider will encourage employees to consider what life will look like when they retire. Not just the money but questions like “How will you feel about being in the company of your spouse or partner 24/7?", “How will you be impacted socially by not having workmates around?” and “How will you occupy your time?”.
This is a big step in the right direction. But employers could be doing more. Much more.
A role for digital in engaging employees earlier in their lives
Digitalisation can kick-start this guidance and education process to help people get ready for retirement as soon as they start at a company.
A lot of employers in the UK are making use of MyEva, ( A digital financial adviser provided by Wealth Wizards Turo product) employees are taken through a financial wellbeing journey and encouraged to review their pension annually. MyEva uses nudges and colourful graphics to encourage staff to think about increasing savings and pension contributions. And because people are more likely to trust their employer, as opposed to a financial adviser, it seems to be working.
As so often seems to be the case, there is a Coronavirus angle insofar as the audience, MyEva customers are more engaged during lockdown and digital engagement has significantly increased. This is something all employers, particularly the bigger ones, should be thinking about as the lockdown continues.
The tech must be simple, intuitive and engaging, and that means deploying personal nudges.
Better still, it could ‘nudge’ and inform employees about the tax benefits of retirement savings pre bonus payments or, link to the bank account of users through Open Banking so it could respond to personal data. For example, if a user has a large amount paid into their account, the app or portal could suggest using some of that to pay into an ISA or pension. At the end of the tax year it could remind users of their remaining pensions and ISA allowances.
I believe that the major benefit for workplaces in all this will be talent-retention. Staff who feel they are being cared for, especially with bespoke guidance, are more likely to want to stay at that firm.
So, this is a call to action for employers: put your arms around your employees' shoulders when it comes to their financial wellbeing. Make them feel that there is another them helping them earn money for their retirement.