Lack of digital innovation and uninspiring saver engagement efforts by the pensions industry could be jeopardising millennials’ willingness to save enough for a decent retirement, new research by ShareAction has found.

The responsible investment charity is urging the pensions industry to radically rethink its out-dated and uninspiring communications with younger workers in particular.

Come April, minimum contributions into workplace pensions will rise from 2% to 5% of salary. This risks prompting UK savers to opt out of their workplace schemes, even though 5% is still far short of the 12% often advised by industry experts. One answer to this conundrum is to make pensions more aspirational and emotionally engaging by explaining the many ways that savers’ investments are making a positive difference to their world.

ShareAction’s report, entitled ‘Pensions for the Next Generation: Communicating What Matters’, cites substantial evidence that millennial savers are distinctly interested in the impact of their savings. For example, 84% of pension scheme members say they would prefer a pension that uses investments to encourage companies to operate responsibly.

The charity has produced a short video capturing the main points made in the report.

ShareAction recommends that auto-enrolment providers engage scheme members by framing their communications more emotionally.  Most auto-enrolment providers undertake a range of responsible investment activities but fail to communicate this effectively to their members.  ShareAction’s report challenges providers to use responsible investment as the basis for low cost but tailored digital communication with members, showing them how their pension is relevant to the economic, social and environmental issues that matter directly to them.

For example, if providers survey their members and find that they care about fair pay, providers could communicate their stewardship strategies on executive pay and a Living Wage.  If members care about the environment, providers could explain, not least visually, how their money is invested in green infrastructure and renewable power.  Interested savers could get information on stewardship strategies to address the gender pay gap and support flexible working. Once this initial communications gap has been closed, there may even be scope to develop investment options allowing savers to invest in more dedicated impact investments.

More than half of millennials want to do their financial planning on a smart phone, so these emotionally engaging new stories about where pension assets are invested should reach young savers through digital and social media channels. All UK pension providers should have an app and an active digital presence. Currently, ShareAction finds that only two of the nine largest UK pension providers in their study have an app, and these two apps have low user ratings.

ShareAction finds that, other than a welcome pack and annual statement, most pension providers do not actively reach out to members until five or ten years before their retirement date.

Further improvements that ShareAction will be campaigning for include:

  • Annual reporting by auto-enrolment providers on the percentage of active usage of their online platforms and strategies to increase saver engagement.
  • Surveying members for their views on how and where their money is invested. The results of these surveys should inform communications, including tailoring them to members’ specific interests.
  • A review by the Department for Work and Pensions of the role of employers in enabling or inhibiting member engagement.
  • An industry-led advisory group on member engagement and financial inclusion, sponsored by the Minister for Pensions to examine mechanisms that could help achieve deeper engagement with pensions and higher contributions.

Catherine Howarth, Chief Executive of ShareAction, says: “Our research finds a huge opportunity being missed to get people feeling more positive about their pensions and about saving in general. For young people, it’s essential to make the case that their pension is already making a positive difference to their lives. It’s not all about waiting until retirement. The savings crisis remains acute in the UK but our report finds low cost opportunities for the pensions industry to make a real difference”

Bruce Davis, Joint Managing Director of Abundance Investment says: “For too long the pensions industry has acted like English people abroad, as if shouting more loudly and more slowly was the only way to get people to engage with and understand financial decisions. We welcome this report which provides solid evidence that people do understand the power of their pension pot to create not only a more secure future for themselves, but a more sustainable world to spend it in. This report also clearly demonstrates how auto-enrolment could be the key to unlocking ethical investment for mainstream investors, if only the providers would listen to the demands of their members to know how and where their money is invested.”

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Notes for editors:

  • For more information, please contact Beau O’Sullivan at beau.osullivan@shareaction.org / +44203 475 7859
  • To see a summary of the report, including a short video, click here
  • To read the full report, click here
  • Auto-enrolment is a Government initiative which took effect in 2012 in which every employer in the UK must enter their qualifying staff into a workplace pension scheme. Since its launch, it has brought nine million people into the system.
  • ShareAction is a campaigning organisation with a mission to turn the investment system into one that truly serves savers, communities, and protects our environment for the long term.