As the next increase for auto-enrollment goes live, it’s essential that providers think about how they’re going to keep these customers engaged or they risk losing revenue.
The latest data from The Pensions Regulator showed in January a total of 10 million workers were automatically enrolled into a pension scheme while 11.5 million were already active members of a scheme and 438,000 were members of a defined benefit or hybrid scheme.
From the 6th April, the minimum contribution rates rose from 5% to 8%, with the employee paying 5%. But while this is a positive step for lifetime saving, there’s a real risk that as the contribution levels rise, so does the risk that people will choose to opt out, deciding to fend for themselves instead.
Key to this is making sure that customers are fully aware of the benefits of regular pension contributions.
This means helping people be more engaged in their finances, making them more aware of how they’re spending and how they’re saving. They can also help set sufficient savings goals and enable them to visualise what these mean in reality.
Help identify goals – Short-termism is a real issue when it comes to lifetime savings. With day to day money worries often difficult to avoid, thinking about retirement can often seem like too much of a luxury. But by helping people set clear long-term financial goals, putting a bit more aside each month can make a lot more sense.
Improve visibility – People shouldn’t view their pension balance as an abstract pot of money disconnected from the rest of their financial universe, it should be there front and centre when they consider their complete financial health. Putting pensions savings pot(s) on an easily accessible platform gives people a constant reminder that saving for retirement is at least as important as those shorter-term saving goals.
Involvement in the process - Playing a more active role in the process should also be considered. By giving customers access to the necessary tools to help them save for their future, and involving them in the decision-making process, later life saving will seem more important.
Show, don’t tell - The world we live in now is all about visibility and awareness, and it’s important to do more to educate and engage. By clearly demonstrating the impact that incremental saving can have on long-term finances, people’s willingness to save a little more each month for their retirement will increase.
Auto-enrolment should be seen not as a hurdle but an opportunity. By delivering additional value, providers will strengthen customer loyalty, boost assets under management, and put themselves on a stable financial platform going forward.
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