AUTO ENROLMENT: MARKET RESEARCH FINDINGS. WORKSAVE PENSION PLAN. Auto enrolment represents a big change in direction for the pensions industry. Through our research, we aim to help prepare both employers and employees for the challenges ahead.
BACKGROUND. As a leading provider of workplace savings solutions, it s only natural that our aim is also to lead the way with regard to auto enrolment. And so, with this in mind, we ve undertaken extensive market research to establish employee attitudes towards not only auto enrolment itself, but also how they wish to be communicated with. We also gave specific focus to the enrolment notification and opt out facility, as key stages in the employee s journey. Through an independent research agency, we conducted two rounds of market research through a series of small group interviews, across the UK. A range of employer types were covered, with sizes ranging from 50+ to 5000+ employees, all of who would be eligible for auto enrolment. ATTITUDES TO AUTO ENROLMENT. Our research revealed employee attitudes to auto enrolment in general, including levels of awareness, and their expectations around its implementation. The research found that there is currently very low awareness of auto enrolment and, once an explanation was provided to research participants, they felt it to be a significant change. There was also an obvious requirement from employees for support around understanding this change, although many acknowledged that it would provide them with the nudge that they needed to start to save. They expect major government led communication to help inform them; It will be like the Census, won t it? They are also expecting substantial communication from their employer, both in verbal and written formats. Many employees, in particular those in younger life stages, will seek informal advice from older family members. Employees expect that the web will also play a role in the decision process, and is a popular choice for the location of further information around auto enrolment and how it will affect them. It is clear that employees lack knowledge around pensions, and will require much more information and guidance, particularly around the subject of investments. However, clear communication and a friendly tone will help to reassure employees and encourage engagement. We segmented our researched audience into three key groups, linked with their particular life stage: Young / pre family life stage 22 to 30 year olds Family life stage those in their 30s and 40s Older, post family life stage those in their 50s and 60s
Understanding how different groups of employees feel helps us shape how best to communicate to them. So, outlined below are some of the key findings attributed to each specific life stage group. YOUNG / PRE FAMILY LIFE STAGE (22 TO 30). Pensions are nothing to do with me/my age Focus on living for today and enjoying life while you can Pensions are part of adulthood/ life stage not reached yet, including Being settled (in a relationship) Owning a home In a proper job Being 30+ Little knowledge of state pensions Complexity of paperwork Expectations of changing employment Affordability a big issue Minimum/low wage Student loan/other debt Will seek advice on pensions issue Parents Employer/line manager Older colleagues SUMMARY Most difficult to engage with on pensions / retirement Messages on flexibility highly relevant opting out, portability, stopping/starting Postal communications need to work particularly well to say: this is relevant to you/this is important FAMILY LIFE STAGE (30s AND 40s). More spontaneous guilt with not paying into a pension Haven t got round to it/missed out More awareness of pensions but more cynicism/distrust Pensions from past employment frozen Expectations of disappearing state provision Some preference for maintaining control over savings e.g. ISAs, so accessible for family needs (not doing this either) Prompts some comparisons with current employer scheme/ is it a better deal? Affordability issues Cost of family/housing/education Single parents Current recessionary pressures Hours cut Fear of redundancy/partner redundancy Relying on property Spending has often been on property Expectation of future downsizing Part-time female workers with partners Focus on partner s income/pension SUMMARY Open to auto enrolment nudge as long as affordable Will be judged in context of family earnings Particularly motivated by concept of savings mounting up Portability/transparency key issues First priority is making sure children are okay; will then worry about own retirement later
OLDER, POST FAMILY LIFE STAGE (50s AND 60s). Some regret at having left it too late Very limited other provision Know they will be reliant on low state pension And some resentment at having to wait longer to access this Examples of very limited understanding of pensions at this stage and anti pension sentiment Confusion between this and State scheme Suspicion/cynicism that auto enrolment will result in further erosion of State scheme Strong cynicism about company and private pensions Reliance of women on husband s pension Have not felt it is their role to have a pension Lack of understanding/education particularly if any complex literature Not always comfortable with written communications Some reluctance to access the internet for financial matters Some feel they ve missed the boat/are too old to make a difference SUMMARY Some preference for opting out at this stage Need for clear distinction between state scheme and auto enrolment Particular need for straightforward non-written communication e.g. video on website to support written communication ENSURING AUDIENCE NEEDS ARE UNDERSTOOD. It can be seen from the above that, whilst there are a number of parallels that can be drawn across employees from all audience groups, both employers and providers need to take into account the differences between the segments, and reflect this in their communications accordingly.
HOW EMPLOYEES PERCEIVE THE BENEFIT OF AUTO ENROLMENT. The diagram below highlights how employees feel auto enrolment is going to benefit not only them, but their employer and also the government. It also shows where they feel it might be to their disadvantage. It demonstrates a level of cynicism from the employee perspective towards both the government and their employer around money savings. EMPLOYEE BENEFIT EMPLOYER BENEFIT GOVERNMENT BENEFIT YES Will make me save Provide me with a pension I would not have Employer adds to it too NO Money I need now being deferred Can t get access to it/not in my control Don t know what it will mean for my retirement Employer might offset costs by giving me less elsewhere NO Will cost employer extra Employer likely to make up for it in other ways Fewer new recruits No/lower pay rises Longer pay freeze No bonuses BUT Employer unlikely to discourage them from joining, despite the above More likely to encourage take up YES Will save on state benefits Will reduce state benefits
WHAT WILL EMPLOYEES DO? In both rounds of our customer research all interviewees were asked what they would be likely to do on being enrolled into their employer s pension scheme. A total of 123 interviewees took part. We ve collated the results below. 39% 35% 18% 8% Would stay in the scheme and pay the minimum contribution Would stay in the scheme and think about paying in extra Don t know what they would do Would opt out Our research indicates that at least 74% of automatic enrolees will choose to stay in their pension scheme. These are very encouraging findings.
ENROLMENT NOTIFICATION. CHANNEL OF COMMUNICATION. During the first round of research, four different styles of paper enrolment notification were tested, including multiple options for the notification s packaging. We also explored the use of other technologies to fulfil the notification, and what the appetite for these was across the employee population. The resounding response was in favour of paper notifications. Even in the youngest audience segment, where there was a greater emphasis on online communications, and a general lower relevance of mail, the feeling was that often work email isn t easily accessible, and personal email is too easy to delete. However, the postal communication will need to be well designed and written to ensure that it s opened and the content is read. ENROLMENT NOTIFICATION PACKAGING. One of the greatest challenges of direct communication is ensuring the recipient opens it. Therefore, we dedicated a section of our research to the packaging of our enrolment notification. Employees receive so much junk mail that we need to ensure the notification communication stands out and gets opened but we must be careful not to make it look too promotional. A series of different packaging options were shown to the research group, ranging from the inclusion of imagery and message stamps, through to plain and simple. The results showed the following: C4 sized envelopes are best, as they are the most noticeable and perceived as the most important or official. Inclusion of the employer logo on the envelope is beneficial, but inclusion of the Legal & General logo would serve as a negative influence, as the employee currently has no relationship with Legal & General as a company. The envelope needs to be plain white, with no imagery or promotional stamps. It should be marked with a simple message such as private and confidential in order to signify its importance. Messaging on the envelope should avoid certain terms: Your pension : at this stage, employees don t have one so feel it s not relevant to them Aggressive, pushy tones: something like you have 30 days to decide makes the employee feel threatened Promotional tones: employees are more likely to throw away the envelope if they feel the contents are trying to sell them something Personalisation on envelope messaging (not including the address field): this is viewed as tacky and too promotional
ENROLMENT NOTIFICATION CONTENTS. As well as opening the communication, we also wanted to establish what factors would help employees read and understand the enrolment notification contents. The research found that a roll-fold A4 letter worked best, combining further information. Employer logo to go here so employees immediately connect it to their employer Clear attraction of figures, particularly employer s contribution Specific details of employee contribution percentage to be included in letter and leaflet Simple layout of additional information was appealing to employees Two options were communicated clearly and came across as balanced and non-biased Useful to be told level of basic State Pension Illustration of monetary costs (rather than percentages) very helpful Additional information leaflet attached to letter was an effective way to ensure that employees didn t throw away/ lose additional information
The overall response to the notification was positive and identified the following strengths: It s accessible and easy to understand Brevity/overall length it s comfortable to open out and read through Clear presentation it s not crowded, with no small print Balanced and unbiased informative not selling Good flow takes you through the topic in a logical order However, there were some elements identified that need refining: Clearer signposting is required regarding where to go to get more information, as we are at risk of assuming too much knowledge within the employee population Percentages are not understood by everyone, and in particular caused confusion between full time and part time employees around the amount of money that will be taken from their salary. To help counteract this, example illustrations should be included so employees can see how a particular percentage impacts specified salary amounts. Elements of the language used weren t understood; for example, the concepts of tax relief and pensionable earnings will need to be explained in more detail. The employer contribution is a key attraction and should be highlighted Employees understanding of investments is low. Attention should be given to the language used as the well as the information given.
OPTING OUT. The web provides the most acceptable route for the provision of an opt out facility, and gives an important instant acknowledgement of their decision. However, some, particularly those in the older life stage, prefer alternative routes, for example by post. Other media (text, barcode/smartphone technology, etc) have little appeal for opting out, as they re not perceived as being official enough. Whilst employees want the opt out process to be smooth, they don t want it to be too easy. They recognise that it is quite an important decision for them to make, and so want to feel like they have been given access to enough information to allow them to consider their options before actually making that decision. A definite perceived benefit of using the web to opt out is the ability for the website to provide supplementary information to the decision-making process, not just to opt out, or register details. WORKSAVE CHOICE. Our opt out solution, WorkSave Choice, received a generally positive reaction. Employees felt it provided a good amount of additional information Its content is well balanced, neutral and clearly presented The navigation seems to be straightforward with a clear route to find further information The choice of repayment options (via payroll or direct to bank account) is liked The ability to print off confirmation of opt out and/or receive email confirmation is appreciated Again, the issue of employee knowledge level and understanding was a barrier. There is limited comprehension across the wider employee population of concepts like pensions, tax relief, percentages, and most importantly, investments. From this feedback, Legal & General has decided to split out the information and opting out/registering details side of the process and that of the employee s investment strategy. This will enable the employee to focus on the initial decision of whether or not to remain in the scheme during their 30 day opt out period. They will then be able to progress through to amend their investment information online once the opt out period is over. Alternatively, they will be able to change investment funds through our helpdesk. This will remove the element of unnecessary confusion for those employees who have a low level of investment understanding.
SUMMARY. As highlighted within this document, there are many findings from the research carried out that will provide useful insight to us as we progress the auto enrolment support we are providing to employers and employees, both on a high level, and also with specific reference to particular communications. However, the main point that has come across very strongly throughout all the research is the low level of understanding, generally, of the audience around pensions and pension related issues. This will need to be taken into account when all communication items are created, both from employers and Legal & General. This is particularly important for items provided to the employee at key stages of their decision making, including the enrolment notification and information/opt out website. Legal & General Assurance Society Limited. Registered in England No. 166055 Authorised and regulated by the Financial Services Authority. Registered office: One Coleman Street, London EC2R 5AA. www.legalandgeneral.com/workplacebenefits Q0032874 11/11 H0123958