Know how to communicate pensions

Utter the words ‘company pension plan’ to your staff, and you will receive a variety of reactions. Often, they will range from the completely disinterested to the downright hostile. It is significant that so few responses are initially positive.

This is of course entirely unfair on employers seeking to support their staff with pension planning, but shows that employees need a better understanding of what is on offer to them. Pensions are no different to other complex areas of life, and it’s easy for employees to default to a simplified viewpoint based on little hard fact.

Stock market crash

Many employers now operate some level of defined contribution pension plan, and most employees will find that at least part of their pension fund will be invested in equities, which will have been affected by the 2008 stock market crash.

While the full impact of this may not yet be apparent to employees, it is only a matter of time before they receive their annual benefit statements and realise the extent of the problem.

Although it is impossible to overlook the negative impact of the crash, the reality is that the majority of staff will be many years from retirement age, and the true impact on their final pension fund may be relatively minimal by the time retirement is reached. Many others will be shielded from the worst of the impact of the stock market collapse by their investment choice or the advice provided. So the actual impact needs to be seen in the light of a fuller understanding of what each employee is trying to achieve.

The danger for UK employers however stems from workplace doom-mongers who will seek to bad-mouth the pension offering to any colleague that will listen. From such acorns of discontent a massive wave of negativity may result. Clearly, HR professionals can have a pivotal role in tempering this problem, by assisting employees with a fuller understanding of the long-term nature of pension planning. But is this an HR problem?

HR interest

There are several good reasons why the HR professional has a vested interest in tackling such issues:

Reduced employee engagement may lead to lower productivity, which is always to be avoided, but much more so in the grip of a recession.

The total cost of the company pension plan (including contributions, fees, levies, time etc) will often be one of the biggest annual costs for an employer. Such a big spend demands a positive return on investment (ROI), or this is wasted money.

Disgruntled employees are likely to beat a path to the HR department to vent their frustrations, and many HR departments are busy enough already without having to reassure staff on such issues.

As Carole Goldsmith, group HR director at The Goodwood Estate, says: “The value of good benefits communication was really highlighted to me when we recently relaunched our benefits package. The employees now have a much better understanding of what is on offer, and this has resulted in a marked increase in take-up in our pension and other offerings.”

A recent survey found that 80% of companies agreed that educating staff encourages take-up of benefits, so it is clear that employers can see the value of such exercises. It’s time that HR takes ownership of the communication issue.

If you only do five things

  1. Engage your staff

  2. Use plain English

  3. Communicate regularly

  4. Measure their understanding

  5. Use experts if appropriate.

More information

Expert’s view:
Steve Herbert, head of benefits strategy, Origen

What are the biggest challenges?

The biggest challenge in any communication exercise is presenting the information in a style that engages the employee. Pensions are not everyone’s cup of tea, so it is important that the information provided is relevant and informative and, if possible, slightly entertaining as well. It is also important that the format used is accessible to the group targeted.

What should you avoid?

It is absolutely crucial not to assume knowledge on the part of the audience. The reality is that most employees, even those that claim they understand all the elements of pension planning, may not be aware of some of the fundamental building blocks of pensions saving, so the same messages should be given to all.

Top tips

  • Avoid technical content overload: No-one will thank you for a presentation laden with technical detail. Simplified analogies can be backed up with hard facts on a case by case basis as required.

  • Assume zero knowledge: It’s best to assume that everyone in the audience will benefit from a ‘first principles’ approach.

  • Don’t be afraid to use an expert: An external source may provide additional expertise, gravitas and communication skills that will assist you in highlighting the key messages to your employees. Importantly though, it is still your exercise, so keep control and manage the communication medium to maximise results.

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