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Previously in this series, we looked at the array of options and support provided to DB scheme members at retirement. Alongside a trend of increased options and choice we have also seen an increased trend of schemes partnering with Independent Financial Advisers (IFA) to provide impartial advice to members about their options.
In this third part of our series of articles following our in-depth research across 50 trustees and over 1,000 members of Defined Benefit (DB) schemes, we look at the important role of member engagement and communication in ensuring members take full advantage of options and support provided by DB schemes.
Uncovering the concerns of members
We started by asking what factors were most off-putting to members when making decisions about their pension.
As with previous results in this series, there was a very interesting gender divide in the results. 40% of women reported that complex language and jargon was off-putting, compared to only 28% of men, whilst 32% of women reported that they didn't know where to turn to for advice, compared to only 21% of men.
There was also a gender divide when members were asked to consider the impact of the current cost of living crisis on decision-making. Our research showed that between 6% to 12% more women compared to men stated they:
However the gender divide was most stark when we asked how confident members felt about making decisions about their DB pension. 76% of men reported feeling somewhat or very confident, compared to only 47% of women - a huge difference of nearly 30%.
The value of communications
But even if the evidence points to men feeling more confident about making decisions than women, there is no doubt that all members would benefit from more assurance about how their DB benefits work and how to access any support that is available. Trustees can provide this assurance by following a well-designed communications strategy.
In fact, in our experience, this is essential where new options or new forms of support are made available to members. Where new options or support are not properly communicated to members, there tends to be disappointing take-up rates as members are not adequately ‘warmed up’ as to what to expect as they get nearer to retirement.
Reinforcing this view was the result from our previous entry in this series, which showed that, of those members in pension schemes not receiving any support, 43% wanted more frequent communication about options in the years leading up to retirement. This was the most popular option, even ahead of providing IFA support, for example.
The good news from our research is that there is evidence that trustees do see the value of effective communications.
Our research shows that 42% of trustees have already seen schemes update their retirement pack to provide a clearer explanation of options. 34% of trustees have also seen schemes provide additional communications about members' options.
We expect that schemes will continue to improve the quality of their communications. This is not always straightforward, and it is important to plan accordingly to ensure that new communications can be delivered by the scheme and its administrator.
But even if it's not easy to change the status quo, our research demonstrates the value in effective communication and engagement strategies with members. Efforts to improve communications will rarely be wasted effort - particularly in the current economic climate where worries about finances are at unprecedented highs. Our research suggests that women would find more effective communication particularly valuable.
Our team communications specialist, DrumRoll, works with our teams across the firm to ensure our clients produce the very best member communications. Drawing on our expertise, and our research, we know that well-timed and well-targeted communications can make all the difference between an uniformed and unengaged membership and one that has the confidence to take advantage of the full range of options and support available to them.
This series has covered the range of options available to members in DB schemes, the support available at retirement to make effective decisions and the role of communications to engage members. In a change of perspective, our final part takes a look at how trustees set the terms of options provided to members - a challenge made all the more difficult given the recent extreme changes to market conditions and interest rates.
Author
Liam Mayne
Partner & Corporate Actuary
More in our DB pension member options research series:
Part one: Options and choice
Part two: Support at retirement
Part three: Member engagement and communication
Part four: Terms
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