To mark Pensions Awareness Day 2021 (15th September 2021) Howden Employee Benefits & Wellbeing shares its three wishes for driving better workplace pensions and member outcomes: data-driven governance, greener pensions, and better financial education.

Matthew Gregson, Executive Director at Howden said, “Pensions are the single biggest investment many employees will ever make; however, many simply aren’t saving enough and are walking into retirement poverty.

“For employers, the combination of better governance and financial education could be a real game changer in driving better employee behaviours and ownership of their retirement planning. In addition to this, we’re focused on the growing demand from all stakeholders for ‘greener’ and responsible pension investment as part of an effective pension strategy.”

1.      Introducing data-driven governance

Gregson says a data-driven approach to pension governance could radically improve member outcomes and increase engagement with workplace pensions.

He adds that pension governance often falls short because it only focuses on whether the plan as a whole is performing well and if charges are competitive, but it doesn’t analyse whether each employee is tracking towards their own retirement outcome and taking appropriate actions, be that changing their investments or contribution levels, for example.

Gregson says, “We need to move away from governing at scheme level, to governing at an individual level and use data to determine what actions we need to encourage employees to take. Helping employees create a personal retirement goal and then monitoring where they are against that ambition, may be the only way to put the right communications strategies in place and effectively engage the members – personalisation is key.”

2.      Are your pensions green enough?

Recent research from pension provider Cushon[i] found that people are increasingly concerned about the impact their pensions are having on issues such as climate change. It reported that two thirds are concerned that their workplace pension could be investing in businesses that are contributing to the climate crisis, while 88 per cent of employees want their employer to take action to address this such as by moving to an environmentally-friendly pension provider.

The report also highlighted that the average UK pension pot unwittingly finances an average of 23 tonnes of CO2 emissions every year through the businesses it invests in.

Matthew Gregson said, “The upcoming UN Climate Change conference (COP26) will accelerate action towards the goals of the Paris Agreement and the UN Framework Convention on Climate Change and increase pressure on companies to take action on the climate crisis. The question is how investors will play their role in holding them to account.

“Workplace pensions are no longer solely about accumulating a fund to live comfortably in retirement – they form part of company culture and decision-making around ethical issues, which are increasingly important to employees. In addition to ensuring their provider and default fund have an appropriate ESG focus, governance committees can look at the voting records of fund managers to really ensure they are acting in-line with those ambitions. We believe this will drive engagement, especially for the generation coming into the workplace.”

3.      Better Financial education

Employees have experienced financial challenges due to the pandemic and more than ever need support from employers, both for today and keeping one eye on their futures.

According to a survey from Wealth at Work, 41% of organisations are still failing to offer employees any support to better manage their money, even though more than half (51%) of those surveyed said the pandemic had made them conscious of the need to save more, with more than a quarter realising their current savings were inadequate.

Gregson said, “The truth for UK workplace pensions is that we’ve shifted more of the onus for their retirement outcome onto employees. As such, the most affordable and important step employers (and governance committees) can take is in improving financial literacy and engagement with finances, especially retirement planning.

Combined with effective, data-driven governance, companies should be building a clear picture of their employees’ financial needs and concerns and tailoring the pensions and broader financial education and guidance they receive to help employees build better habits around their money. And this should be at an individual level – which may sound difficult to achieve, but, with the right data, it can take little effort to sign post employees to the things they should be focussing on and the resources they can access to support them.”

By Lisa Baker, Senior Editor

Senior Editor Lisa Baker is the owner of Need to See it Publishing Group, providing contract news for business and news sites across the UK. Lisa is an experienced HR writer and commentator, editing HR publications for more than 5 years.