Engagement – the underused risk management tool 

With the rise of defined contribution (DC) pensions, many of the risks associated with building and managing adequate retirement savings have been transferred to individuals. However, this doesn’t make DC a no-risk option for employers. 

For instance, if a lack of savings means people can’t retire, this can introduce succession and workforce management challenges for their employers. Additionally, staff who lack financial security may be less motivated and productive at work. 

This reality means that even the most well-meaning and well-formed workplace benefits packages can fall short of their potential, failing to provide staff with the security they desire. Even where competitive benefits exist, if staff don’t know about and understand them, they may not be valued. 

Engagement is the key tool for employers looking to ensure their people understand and appreciate their pensions and other benefits, so that these investments deliver true value.

Most employers rarely assess whether their employees understand – let alone value – their benefits. 

In fact, nearly half (43%) of UK employers have never engaged with their staff on this issue, according to the latest Mercer DC MOT report. The remaining 57% do so only yearly or even less often. 

Even among employers that do engage with their staff about benefits, many may count an annual pension statement as adequate, but Mercer’s data indicates that most people never even open this communication . If benefits information is provided in a way that people are unlikely to read, watch or listen to, the reality is that it has not delivered on its purpose. 

The result of this lack of engagement is a cohort of workers that does not understand the benefits they receive from their employer and so cannot appreciate them. Poor communication can even result in staff leaving for a competitor in search of benefits they unknowingly already receive.

Every UK employer must have some kind of benefits package outside of salaries. This is because, since auto-enrolment, it is a legal requirement to provide at least the minimum workplace pension – about 8% co-contributed by the employer and employee to a DC scheme. 

Most employers go beyond this minimum, recognising that pensions and other benefits are a key recruitment and retention tool. In fact, just 1% of employers offer the legal minimum pension, according to Mercer’s DC MOT. 

Strong benefits packages help employers stand out from their peers, meaning they are better positioned to attract high-potential talent. They can also help boost morale during employment, making it more attractive for that talent to stay. 

However, the key to unlocking this full potential is ensuring that your workplace benefits package is communicated clearly so that staff know about, understand and appreciate it. Employers invest heavily in their benefits offering and an effective engagement strategy helps ensure this investment is well-spent. 

A simple but effective way to build a benefits engagement strategy is to create ‘nudges’ at key milestones. These could be at a person’s point of joining, periodically throughout their membership of the pension scheme, and at the point of accessing their savings, among others.

These nudges could align with recommendations that the person completes important financial planning activities, such as setting a target retirement age, adjusting their contributions after a pay rise or exploring different routes to access their savings.

This strategy promotes a ‘right message, right time’ approach to employee engagement. It also helps ensure engagement is not a one-way street: staff gain more information about their pension, but they also learn how to act on and personalise it.

Many employers and HR teams are already stretched, making a benefits engagement strategy feel like yet another burden. It’s for this reason that employers shouldn’t embark on engagement alone.

Some workplace pension providers, such as Mercer, provide expert-led employee engagement and communications materials, designed to capture attention and spark action.

When building our communications, we focus on three principles: 

These principles help cut through a world of information overload, bringing forward the right messages at the right time to help both employers and employees get the most out of their benefits offering. 

Mercer’s DC MOT is an audit of your company’s pension practices. It benchmarks your scheme and broader benefits package against those of other UK employers, and against Mercer’s view of best practice.

The results will help you understand how you stand compared to your peers, as well as how your business can save money, increase value and reduce risk in your benefits offering.

Learn more here or speak with your Mercer consultant.