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How to use data from your pension scheme to better understand your employees’ changing pre-retirement needs

How to use data from your pension scheme to better understand your employees’ changing pre-retirement needs

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Baroness Kishwer Falkner, chair of the Equality and Human Rights Commission (EHRC), is concerned about the unequal impact that the coronavirus pandemic may have had on women, who already face inequality in the workplace[1].

What is the EHRC’s first response to this concern? Reintroducing gender pay gap reporting on 5 October 2021, which Baroness Falkner believes is central to identifying and removing barriers to women’s progression in businesses, as the U.K. emerges from the pandemic.

The EHRC’s view is clear – analysing pay gap data can help employers understand any issues that they are facing, put in place action plans to overcome them, and evaluate what is working (and what isn’t).

The parallels with workplace pension schemes
All employers need to do to understand how concerns about the unequal impact of the pandemic apply within workplace pensions is add the word ‘pension’ before the words ‘gap’ or ‘inequality’.

Gender pension gaps pre-date the pandemic but will have been exacerbated by imbalances in, for instance, caring responsibilities and the greater negative impact of the pandemic on part-time positions and roles or industries with predominantly female workforces. The 16th annual Women and Retirement report by Scottish Widows[2] estimated a £100,000 gap in a typical young woman’s savings at retirement compared to a man.

Thankfully, workplace pension issues can also be addressed using the same solution that the EHRC advocates: let your data guide you. Analysing data from your pension scheme can help you understand the issues you and your employees are facing and put in place strategies to resolve them.

Gaining multiple insights from pension scheme data
Challenges that employers and employees face aren’t limited to gender/other forms of inequality; they can also encompass wider pension scheme issues such as low engagement, poor member decision-making, poor financial wellbeing, and inadequate retirement savings.

Pension schemes are awash with data. Traditionally, this data was used solely for administration and record-keeping, but pension scheme managers and providers long ago realised that the information held could be used to gain insights and improve outcomes – particularly in today’s digital age.

Insights can be obtained in areas that can differ by the type of pension scheme. For DB schemes, monitoring continued employee participation is key:

  • Has there been increased interest in transferring benefits out to a personal pension? What types of members are requesting transfers and what proportion end in a transfer? How many transfer requests have been blocked due to the risk of the member being scammed?
  • Have AVC contributions reduced over the last 18 months – either from a lower number of members contributing or lower rates of AVCs being paid?

For DC schemes, where the decisions – and therefore risk and responsibilities – lie with the member, engagement can be key:

  • Are members sticking to the ‘default’ settings – and do these ‘defaults’ remain appropriate post-pandemic? Are members actively selecting contribution rates, retirement ages or investment strategies to suit them? Have they been inspired by recent ESG campaigns to invest more in ‘sustainable’ investments?
  • Has the level of engagement changed over the pandemic – have members lowered their personal contributions? Have members accessed pension savings to help with cashflow issues (and did this lead to any members triggering the money purchase annual allowance)?
  • How else are members engaging – are they registered for online services? What information or documents are they going online to find – and how often are they doing this? What common questions or feedback are they giving to pension scheme managers or providers?
  • Do any of the above differ by gender? Or by age? Or by tax band? Or by location?

The increased sophistication of pension scheme systems also means that measuring outcomes from DC schemes is now much easier – and is becoming more common.

Over 14 million savers now have access to the PLSA’s Retirement Living Standards[3], with pension schemes and providers who have adopted the standards making increasing use of them in personalised annual benefits statements or online calculators that members can use to assess their own projected retirement income versus the standards.

These insights aren’t solely for members’ benefits. Pension schemes, providers, and other industry bodies who have adopted the standards may also be able to produce reports or interactive dashboards that employers can use to understand:

  • How many of their workforce might meet the minimum, moderate, and comfortable standards
  • Whether this differs by gender, age, tax-band, location, or any other feature of your workforce
  • Whether any members may be affected by potential tax issues (such as annual allowance or lifetime allowance charges)
  • The potential actions that could be taken to improve outcomes

Finally, one piece of potentially-vital data that is often overlooked: How many members have given the pension scheme an explicit expression of wish, setting out who should receive their savings should the worst happen?

How else can you gain insight into your pension scheme members?
On top of the insights that can be gained from pension records and analyses, employers can also gain insights direct from your workforce.

Pulse surveys have long been used by corporate leaders and HR teams to understand attitudes to the workplace experience, but they can also be used to address the attitudes or levels of understanding that employees have towards their pension scheme. Do members understand how the scheme works? Are they aware of pension tax relief or tax charges? Do they know the options they have at retirement? Are they interested in environmental, social, or governance issues?

Use data to improve pension scheme engagement, decision-making, and outcomes
Once you’ve analysed the data from your pension scheme to identify the issues that affect you and your workforce, you can put in place strategies to overcome them. These can include reviewing:

  1. The design of your workplace pension scheme: Altering the benefits, default settings, type of vehicle, and pension provider can reduce risks and increase value for money. For instance, reviewing the investment options can help align with corporate or colleague attitudes to sustainability and inclusion.
  2. Communications and engagement strategies: Changing the information that members receive and the format they receive it in can help improve engagement and understanding of the scheme. Employers should consider digital-first approaches (e.g. webinars, online portals, videos, podcasts), as well as approaches that may be familiar and comforting as more offices and workplaces reopen safely (e.g. worksite presentations or drop-in clinics). Using more positive language can help support wider campaigns to improve employee wellbeing as we exit the pandemic.
  3. Wider financial wellbeing programmes: Providing access to flexible benefits or financial guidance, advice, or products could help your colleagues become more confident and competent in managing their personal finances, including saving for retirement.

Crucially, the insights gained from your pension scheme data can help you understand issues where a ‘one-size-fits-all’ approach may work, or issues where segmented or personalised approaches would produce greater impacts.

For instance, many members of DC pension schemes are unengaged, but that doesn’t mean the reasons for the lack of engagement are the same across industries, or across companies in the same group, or even across different cohorts of workers in the same company.

Using pension scheme data: It’s not one-and-done
For employers with over 250 staff, reporting on the gender pay gap will become an annual event again from 5 October 2021. Restarting the regular cycle of compliance brings additional costs, but the benefits are that employers can identify and address issues, monitor trends, measure the success of any actions or campaigns, and more efficiently address reward gaps or workplace inequalities (whether inequality by gender, or by ethnicity, disability, socio-economic background, or neurodiversity, for instance).

In much the same way, employers with the right governance framework who regularly make use of data and technology to better understand understanding the pension saving habits of their staff can personalise their proposition to the circumstances of their workforce and make continuous improvements to the retirement planning and wider financial wellbeing of their people.

[1] https://www.managers.org.uk/knowledge-and-insights/article/closing-the-gap-the-importance-of-analysing-gender-pay-gap-data/

[2] https://adviser.scottishwidows.co.uk/assets/literature/docs/2020-women-retirement-report.pdf

[3] https://www.plsa.co.uk/Press-Centre/News/Article/articleid/983