pensionfundAviva calls for sustained and ‘personalised’ employee engagement to create a lasting savings culture

  • Britain’s workers remain undecided on pension saving – 37% of employees say they will opt out of automatic enrolment, and 28% are undecided.
  • Affordability is a key obstacle – almost half (45%) of employees who do not currently take up the pension they are offered say they don’t have the cash.
  • Only a third (37%) of employees are confident about their financial situation.
  • Two-thirds of employees (65%) say their key workplace concern is how their pay compares to the cost of living.
  • Nearly two-thirds (60%) of employees lack confidence in the UK economy.

Britain’s workers remain undecided on retirement saving despite growing awareness of the government’s reforms, which will see millions of people automatically enrolled into a pension for the first time – Aviva’s second Working Lives* report shows.

The success of the new workplace pension changes, which started to roll out in October 2012, hangs in the balance as many workers focus on making ends meet in challenging economic times, the research into UK private sector employees and employers outlines.

Compelling, relevant and ‘personalised’ communications and engagement within the workplace will be critical to convincing employees to prioritise retirement saving.

Mark Noble, Aviva’s Managing Director Health and Corporate Benefits, said:
“Getting millions more people saving for retirement for the first time during difficult times is a real challenge – but automatic enrolment presents us with a once in a generation opportunity to get this right.

“Automatic enrolment will only become game-changing if employers, their advisers and the wider industry create sustained communications and engagement in the workplace to encourage employees to save.

“It’s about understanding the needs and the circumstances of the actual employees in each business, not as a single group but in an individual way through face-to-face conversations and personalised planning tools.”

Awareness about automatic enrolment increases – but doubt remains
Employee awareness about automatic enrolment (59%) has almost double compared to 31% in May 2012 when the first Working Lives report was released. However, Britain’s workers do not show any more sign that they are likely to actively start saving for retirement.

Overall, 37% say they will opt out when they are automatically enrolled, which is unchanged from May 2012, and an increasing number (28%) are undecided (up seven percentage points from 21% in May 2012). Slightly fewer employees plan to stay in their employers’ schemes (36%, down seven percentage points on 43% in May 2012).

Despite this uncertainty, there are early signs that Britain’s workers can see the benefits of the pension reforms, with almost two-thirds (65%) saying automatic enrolment will encourage saving.

However, almost half (45%) of employees who do not contribute to a workplace scheme they are currently offered say they simply cannot afford to. Nearly one in five (19%) say they do not save into a pension because they are repaying debts and 17% are saving for other things, such as a house or a holiday.

‘Personalised’ communication is the way forward
When asked about the types of communication that would encourage them to save more for their retirement, almost a quarter (23%) of employees say being ‘personally’ shown what they need to save. This compares with 14% who say being shown the benefits of saving would make the difference, and 12% who say being shown how to manage their money better.

Money is king for employees – but can businesses respond?
Two-thirds of employees (65%) say their key workplace concern remains how their pay compares to the cost of living (up from 53% in May 2012), and 65% say their salary is the most important aspect of their job (up 15 percentage points on 50% in May 2012).

For 55% of employees – a pay increase would encourage them to save more. However, rather than focusing on pay increases, a third of employers (32%) are looking for ways over the next year to motivate employees without unduly increasing remuneration.

As they tighten their financial belts, an increasing number of employers (19%) are concerned about cutting jobs (up from 6% in May 2012), and over the next 12 months 20% are focused on maintaining headcount despite the economic downturn (up eight percentage points on 12% in May 2012).

Confidence in the UK economy is lower among employees than employers, with 60% of workers saying they are ‘not very’ or ‘not at all’ confident, compared to 45% of employers. Only 37% of employees are confident about their personal financial situation, whereas 68% of employers are ‘extremely’ or ‘quite’ confident in their businesses’ financial situation.