In our latest research we found that financial support in the workplace continues to focus on providing pensions and pension guidance. Yet it’s fair to say that employers struggle to engage their employees when it comes to pensions. No amount of money spent on comms is going to suddenly increase pensions engagement. So how can we use technology to get employees thinking about retirement and actively preparing for it?
Many people are nervous of investing. The perception that “it’s too complicated” or “it’s for people who already have lots of money” is a widespread misconception. But do people realise they’re investing if they hold a pension?
Robo-investing and robo-guidance can help to bridge the gap for employees who aren’t familiar with investing. Our research found that both employers and employees are interested in robo-investing/guidance, with more than two-thirds of employees saying they would use this kind of service if their employer offered it. The over 55 year olds we surveyed were slightly less enthusiastic, but as this group of employees is nearing retirement, the evidence suggests they’re better catered for when it comes to saving for their priority - retirement.
Our research also found that decision-makers over the age of 55 are more likely to believe that pensions are the priority when it comes to financial wellbeing. But only 9% of 18–35 year olds cite saving for retirement as their priority. So how can employers use robo-investing/guidance to support the other 91% of younger employees with their financial concerns and encourage them to start planning for retirement?
The fact is, younger employees aren’t ignoring pensions – auto-enrolment has been successful and more people are enrolled into pensions than ever before. They realise it’s important to save for later life; it’s just not important right now. They’ve got so many other things to save for along the way to retirement. Employers need to recognise this and support them when it comes to saving for life events as well as pensions.
The Lifetime ISA (LISA) is a good solution, especially combined with robo-investing/guidance. It helps 18-39 year olds to save for their first home and for retirement. Account holders can save up to £4,000 per year, without paying any future income or capital gains tax, and get a 25% tax-free government bonus on the money they invest (up to £1,000 per year). Providing the LISA via online investment platforms gives employees the information and tools they need to make their own decisions and allows them to manage their savings and investments easily. Having a clear overview of savings for retirement makes it easier to plan. But employees are likely to be enrolled in a company pension scheme as well and may have pensions from other employment, as well as personal pensions. It’s difficult for employees to find out what they’ve got in their pensions so far and what the projected returns look like. Technology needs to be used to help employees get an overall picture of their pensions savings, making it easier for them to plan for retirement and make any necessary adjustments to savings.
The dream: having sight of all your pensions accounts and savings in one place.
Picture the scene through the eyes of one of your employees…you’re saving up to buy your first home. You’ve got your LISA through your employer and your regular contributions are being taken straight from your pay which makes it easier to save. You’re also saving into the company pension scheme and your employer is making contributions. And because your employer has the technology, you can check the status of your pension as well as your savings for your first home and retirement, making it so much easier to plan for later life. What could make this better?
Your employer making contributions to your LISA!
Back in the shoes of the employer, if your employees currently put 6% of salary into their pensions and you match this, you can support your younger employees - and improve their engagement with pensions and planning - by allowing them to change their pension contribution to 4%, which you then match, and let them put the remaining 2% into a LISA direct from pay, which you then match too. This helps them with their first house purchase, but also supports them to start planning for their retirement. And technology underpins it all!
So, how do you keep your employees engaged with the LISA and planning for retirement? By making it easy to invest for the future with artificial intelligence (AI). For example, an automated investment monitoring service that keeps an eye on employees’ investments, so they don’t have to. Alerts are sent via SMS/email so that employees always know where they are when it comes to their savings for later life and everything in between.
It’s not just younger employees that benefit from the technology. Consider your higher earners, most of who will be affected by the tapered annual allowance. Why not set up an alternative savings account and automatically direct excess pension contributions into it? It’s even better if it’s an ISA as employees save tax-free up to the annual ISA allowance. Allowing employees to manage this online and access the money if they need to helps them with their retirement goals too.