In an age where millennials (people born after 1980) account for a growing percentage of the workforce, and baby boomer representation decreases, companies are recognising that the two generations have a very different attitude when it comes to saving for their future. With this in mind, HR departments are starting to adapt pension schemes and are considering how to best tailor pension advice to a younger generation.
Most millennials are quick to point out that they will not benefit from the same level of state or employer pension income as their parents did, and as such they understand that they must provide for themselves in retirement. However, as proven by research conducted by BNY Mellon*, the younger generation are held back by a lack of understanding as to how pensions work.
The research also uncovered the millennial attitude towards saving for retirement – which is viewed as a low priority by many. As well as being attracted towards spending on things they can enjoy today, they also face other calls on their finances, such as student loans and saving for a deposit to buy a home, things that were less challenging for young adults 20 years or more ago.
With this in mind, pensions auto-enrollment can only be a positive step in helping younger employees save for retirement, as it doesn’t require a conscious decision on the part of the member. Millennial engagement, however, is particularly low, as companies often struggle to communicate effectively with younger members of the work force.
Angela Seymour-Jackson, managing director of workplace solutions at Aegon UK, promotes the necessity of the digital approach: “Auto-enrolment aims to encourage a change in attitude towards saving for the future, and for the younger generation, digital tools are essential to interact with their pension in a way that suits their lifestyle.”
Confirmation of this lies in the BNY Mellon study*, which asked younger people how they wanted to interact with pensions schemes, resulting in 40 percent listing websites and email as their most popular choice.
Increasingly companies are recognising that to fully engage this generation, traditional methods of communication need to be brought into the digital age. According to research conducted by Aegon, 87 percent of employers have adapted workplace pensions schemes to suit the needs of millennial workers.
It can be hard for Millennials to seriously consider pensions and retirement, especially with the existence of other financial strains and priorities such as student debt and saving to get on the housing ladder.
The first step may be to make sure they have all the information they need to understand the value of their pension as an employee benefit, such as the value of matching contributions if they are offered. Pension providers and financial advisers including online advice can help with this.
Then the next step may be for them to create a plan that they are happy with. Even if they are unlikely to consider contributing more in the short term, a plan that helps them understand how they might increase contributions when they hit a certain level of salary or get the next promotion will help them see that a reasonable level of income in retirement can be achieved, especially factoring in the State pension. This is another area where online advice can really help with this segment.
By taking a proactive approach to helping millennials navigate the pension framework, employers can help build added value to employee benefits as well as trust and loyalty.
As more and more companies begin to understand the different attitudes and actions of their younger employees, it is encouraging to see the introduction of services and new engagement techniques being employed. Employers are keen to equip this technologically savvy generation with the right tools to make decisions about their future, in order that they do not overlook the importance of saving for retirement.
*research conducted for BNY Mellon, by a team of undergraduates from Said Business School