The way younger adults engage with their pension savings is undergoing a rapid transformation. This looks set to continue with legislative changes which will see 18 to 22 year olds automatically enrolled into workplace pensions for the first time. This has led to industry calls for more financial education in schools to help young people better understand a range of financial issues, from pensions to student debt.
In the absence of this at present, young people are increasingly seeking advice from a range of unconventional yet influential sources, like TikTok, YouTube and Instagram. These platforms offer bite-sized content that simplifies financial subjects, reshaping how the younger generation approaches financial literacy.
Against this changing background should pension providers and employers be re-evaluating their engagement and communication strategies?
Opportunity
Recent PPI research recognises the difficulties in engaging a broad spectrum of pension members. Its report ‘What is the role of engagement in pensions?’ suggests that not everyone can be fully engaged, and as a result challenges in making informed decisions may arise.
As a result the PPI recommends tailoring engagement techniques to the diverse needs of different groups, emphasising that one-size-
fits-all strategies are unlikely to yield optimal results. It says factors like demographic characteristics, financial capacity and digital capabilities will impact engagement levels.
Industry experts say the changes to auto-enrolment present an opportunity for 18-year-olds to start saving early. They say young adults should grab the opportunity to benefit from employer contributions into these savings plans.
Scottish Widows pension specialist Robert Cochran says: “We know that most young people enter the workforce without a good understanding of financial services solutions so they will need extra help to get to grips with pensions – and that’s something we’d love to assist with. We have a range of resources including digital and interactive tools that help people get clued up on what they need, whether it will be enough, and what they can do next.”
Aviva director of workplace savings and retirement Emma Douglas says: “The proposed changes to auto-enrolment will mean 18-year-olds getting a head start when it comes to saving for retirement. The message is the same for young people as it is for all savers, which is simply, that this is an opportunity to start saving for retirement and you can benefit from your employer’s pension contributions.
“The younger generation considers their employer a trusted partner when it comes to financial wellbeing, and starting their
employer pension savings earlier can help build this relationship. Engagement needs to be timely and relevant, and we work with our data science teams to ensure our communications are focused on what we know is important to a particular age demographic.”
Punter Southall company director Alan Morahan says: “I’m not anticipating too many challenges around this. The 18-year-olds who will be enrolled are likely to have few other outgoings and, as contributions are being deducted directly from their salary before they see any money in their bank account I don’t believe they’ll really notice that it’s happening to them.”
Douglas adds: “The challenge is how to get people to understand what might feel like a financial sacrifice now, could bring much greater benefits to the rest of their lives. Bringing that to life has always been a tough nut to crack.”
Cochran says: “Young people are doing everything for the first time – this means we need to make sure we support them in whatever way they need. They are digital natives, so we will look to provide a digital-first multi-channel support strategy.”
Early years
Given the likelihood of numerous job changes during early career stages, experts say the pension industry must adapt to ensure continuity and sustained engagement with younger workers as they transition between employers.
Morahan highlights the ‘pot for life’ debate, expressing concerns about young individuals accruing negligible pension pots with multiple job changes and the challenge this poses.
To address this issue, Punter Southall launched the National Pension Tracing Day initiative in 2021, garnering support from leading pension providers such as Aegon, Legal & General, Scottish Widows and Standard Life.
Cochran says providers are also helping people track and consolidate older pension pots, noting Scottish Widows’ collaboration with Moneyhub to connect pension plans with both traditional and ‘neo banks’.
Cochran says: “The first big thing is to help young people keep track of their pensions and at Scottish Widows our link up with Moneyhub will allow them to connect their pension plan to not just the big banks but the newer ones too.
“The second thing is to make it easy to consolidate pension plans – allow customers to do this in the app and make the journey easy. Last year we saw over £1bn of digital transfers.”
Douglas anticipates the transformative impact of the pensions dashboard, which aligns with their data showing increased consolidation within the first six months of joining a pension, potentially simplifying the process for the first wave of automatically enrolled 18-year-olds.
Douglas notes: “We know from our own data that pension savers are more likely to consolidate within the first six months of joining a pension and have therefore built into our engagement material the necessary steps for anyone that wishes to do so.
“The pensions dashboard is likely to be in place around the time the first 18-year-olds are automatically enrolled.
“This development carries with it the potential to transform the number of people who take their pension with them to their new employer and the ease with which that can be done.”
The curriculum
Those in the industry want to see a shift in the way financial education is taught in schools, to help engage sixth formers and those at college with the pension industry.
Morahan advocates for a fundamental change in the national curriculum to enhance financial literacy, and suggests the pension industry adopt more accessible language in communications to bridge the knowledge gap among those leaving education.
Employer responsibility
Employers also have a responsibility to educate and encourage young employees to actively participate in pension plans.
Douglas says: “An engaged employer can make a real difference to the outcomes driven by pension scheme communications. From a practical perspective, employers can pre-empt future regulation by encouraging those aged under 22 to opt into the pension scheme, or by enrolling them automatically through their contract of employment. This will ensure that younger savers have the same opportunity as older colleagues to benefit from the full value of the benefits package on offer from their employer.”
School of TikTok
Whilst the industry calls for financial education to be taught in schools, young people have for a while been turning to unlikely sources for financial advice on platforms such as TikTok as well as YouTube and Instagram that offer short-form content which simplifies complicated subjects.
‘Finfluencers’ share advice on investments, property, personal finance, and pensions. Yet, for young people accustomed to instant gratification on social media, the idea of waiting for returns from their hard-earned money is a challenging concept and so advice on pensions has lagged behind other types of financial advice.
The FCA introduced new rules designed to combat illegal financial promotions this summer. New social media guidance aims to
modernise how firms promote financial products online. The FCA says it is stepping up its oversight to protect consumers in light of the growth of finfluencers. Through roundtable talks, infographics, and live events, the FCA and the Advertising Standards Authority are working together to educate consumers and influencers about the risks involved.
Experts suggest the pensions industry as a whole addresses the challenge of younger savers facing financial misinformation on social media by enhancing engagement, recognising the difficulty users have in discerning accurate information, and suggesting an opportunity for trusted brands to provide appealing content and support influencers who promote accurate financial education.
Douglas says: “Younger savers who are exposed to misinformation about financial education on social media apps are likely to be less well equipped at putting this information into context by not having the benefit of experience. The pensions industry is getting better at engaging with younger savers through social media, which is one way to tackle misinformation.”
Cochran adds: “One of the challenges of TikTok and other platforms is that anybody can post pretty much anything, and it becomes really difficult for users to identify people providing genuinely helpful accurate information. So, there is an opportunity for trusted brands to provide content to users – the trick however is to make the content interesting enough to attract users in the first place. The pension industry should develop a presence where young people go and support/sponsor influencers who are ‘doing the right thing’.”
Delivering
Scottish Widows has prioritised connecting with younger individuals through content creation on social media platforms, emphasising a strategic focus on communication techniques that aim to boost pension engagement within the 18 to 25 age group.
Cochran notes: “Like other groups, going where people already go is the best way to engage them, this makes it as friction-free as possible. For those young people who bank with Lloyds, Halifax and Bank of Scotland already, they will see their pension next to their bank account and this gives them a friction-free update to their pension value.
“This year at Scottish Widows we have been testing out different ways to engage a younger audience. One of their platforms of choice is TikTok, and this year at Scottish Widows we created a dozen short TikTok films.
“Some were user-generated content that we helped create, the results were staggering – they received 175,000 link clicks, 52,000 likes and over 1000 shares from users. This shows a significantly higher level of interaction than other channels indicating that younger users will interact and share this content when it is created with them in mind.”
Scottish Widows has also incorporated podcasts into its communications strategy with the provider recently featuring on the popular 90s Baby Show.
Cochran explains: “We sponsored content on financial resilience and pensions. This was a powerful tie-up and surprised us by the level of support it received from people who regularly viewed the 90’s Baby Show on YouTube.
“This was an especially challenging cohort to reach for a traditional pension provider. The audience is predominantly young and black – a population which our retirement report shows are not well prepared for retirement. But this shows the power of working with content creators and being willing to go to their space – that’s where it becomes much more credible.”
Douglas says: “We have found that communications direct from employers can have more impact because people tend to have high levels of trust in their employer. This is especially important for younger savers who might seek the views of colleagues when it comes to making decisions about their pension.”
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