Nigel Ferrier and Diane Hassall-Mead explain how smart marketing of pensions improves engagement and education
Automatic enrolment is here. And opt-out rates are lower than many in the industry had expected. The government is doing what it set out to achieve: ensuring that most workers are in a pension scheme and, therefore, making some sort of provision for their retirement. But unless action is taken to engage with those workers and educate them about what being in the scheme means, there is a real danger that in 20-30 years time, we will be facing a new pensions crisis as people come to retire and realise that they have been saving very little. The minimum contribution levels are simply not sufficient to provide a sensible income at retirement, even if the investment returns on the funds prove to be good.
We don’t need to make it complicated – being in a pension scheme is simply another way to save. Or perhaps there’s another way to look at it, as someone recently commented to me: “We insure our cars, we insure ourselves, we insure our houses, we take out holiday insurance. Maybe we should consider saving to insure our future income.” But saving for a distant future often falls down the list of priorities. Many people prefer to use any spare money for more immediate things, such as saving for a holiday or having a night out. Saving for their long-term future needs to compete for a share of an ever-shrinking household budget. In essence, we need to market pensions in the same way as other products are marketed to promote the benefits.
A brave new world
The digital age has transformed the world of marketing. Consumers have become much more sophisticated when choosing what to buy. The internet gives us access to a wealth of information about companies and their products, and social media sites mean we can easily compare products and benefit from the experience of others. And, in response, the past decade has witnessed a quiet revolution in marketing techniques. Campaigns have become increasingly sophisticated and highly targeted to particular groups of consumers. More resource is spent segmenting the target audience rather than treating everybody the same. We can (and at Ferrier Pearce we do) market pensions this way too. It isn’t difficult; schemes already have the data they need.
We are all individuals
No longer should it be acceptable to send out a generic communication from the pension scheme to all members. Instead, the audience should be segmented into different target groups, each with their own angle on the key messages. For example, where the message is ‘You need to save more’, typically younger employees will think that while they’d like to save more, they have limited cash and plenty of time to save more when they get older. After all, they have another 30 to 40 years to save. Older employees may well be able to save more, but wonder if it’s worth it – have they left it too late?
And within those groups, attitudes may also differ depending on things like gender, job role, salary, whether or not people have children, and their parents’ attitude towards pensions. It’s time to put yourself in their shoes and understand where they’re coming from, and what resistance they may have to pensions, so you can then fine-tune the messages for them.
We’re in and we get it
When members are helped to see pensions in this way – as saving to secure an income for later life, to help them not only get by but also enjoy their future – they do get the point. Particularly if they’re shown the impact of delaying saving. Many do take action, saving a bit more or taking time to actually set a target income for retirement. And if reminded regularly of the need to save for their future, perhaps when they get a pay rise or reach a significant age, or even get married or start a family, more members take action.
As with most things, this isn’t rocket science. But for too long, our industry has been reluctant to market pensions. Unless we change, we will be heading towards yet another pension crisis.
Written by Nigel Ferrier, executive chairman, and Diane Hassall-Mead, managing director, Ferrier Pearce