Why some employees will never value pension plans

Time to rethink how employers communicate pension issues
By Jacqueline Taggart
|Canadian HR Reporter|Last Updated: 09/29/2006

Consider the following finding from an analysis of group savings plan members released in May this year. Nearly half — 49 per cent — are not taking full advantage of contributions from their employer. More than 37 per cent of members eligible for a matching contribution from their employer are not contributing anything to their group plan, according to Fidelity Investments, which conducted the analysis on a sample of 36,000 Canadian plan members.

In some instances, employees are missing out on as much as $1,600 a year in matching contributions from their employer.

It’s no secret that employees don’t “get” pensions. The industry is so engrossed in its own coded language it’s unable to accept or recognize any other mode of expression. How many HR managers have tried explaining termination values or joint and survivor options without seeing the eyes of their audience glaze over in complete bewilderment?

Second, the industry is motivated by fear — fear that if precise technical terminology isn’t used, employers will be vulnerable to costly litigation. But they’re being sued anyway.

One definition of insanity is to keep repeating the same actions and expecting different outcomes. While few movers and shakers in corporate Canada would agree they are insane, they certainly fulfil this definition when it comes to communicating with employees. For more than 50 years, pension communicators and HR managers have all used the same core terminology to communicate about pensions and ended up with at least two generations that didn’t understand them. The average expectation was that if people worked until retirement, there would be a small token and a monthly pension payment at the end of it. Now that work relationships and pension plans have changed, it’s about time the way organizations talked about them changed too.

Why should employers care?

Employers, legislators and actuaries need to accept that employees will never care about pensions just because they should. They’ll decide what’s important, what they have time for and whether they value the program enough to contribute their limited resources to it.

Employers will never make them care unless they can enable employees to make that value judgment quickly and easily. Malcolm Gladwell, author of

Blink: The Power of Thinking without Thinking

, refers to the ability to make almost immediate value judgments as “thin slicing.” Essentially this term refers to the way humans process first impressions and little bits of information to create meaning and make decisions about new information or people they encounter. It’s an important concept because the value judgment in that first moment largely determines the relationship with a person or a subject from that point on. And it’s often accurate.

Apply this theory to pension communication, and it’s easy to see how HR managers and pension communicators are set up to fail. They’ve traditionally used inaccessible language, thereby creating a disconnect with the audience. Add this to the fact that the impact and importance of the activity they’re promoting is 20, 30 or even 40 years in the future. Overwhelmingly, the audience just doesn’t care because organizations haven’t demonstrated any convincing reason why they should.

But I want it now

Of course, poor communication is not entirely to blame. It’s no secret this is a consumer society. The national credit debt load is staggering and getting higher and people’s love of “stuff” (and bigger and better stuff) is a huge factor in their unwillingness to give up or postpone acquiring anything today for what they may need in the future.

The most recent Statistics Canada report on Canadian spending habits in 2003,

Spending Patterns in Canada

, offers the following depressing, if unsurprising, news. While 51 per cent of households report owning DVD players, 32 per cent own CD burners, 67 per cent own computers, 63 per cent have high-speed Internet and 23 per cent subscribe to satellite services, average annual contributions to RRSPs fell by 15 per cent to $1,400. Of course, 75 per cent of the respondents reported their household spent $300 annually on games of chance, confirming the belief that lottery winnings are the retirement savings plan of choice for many Canadians.

Marketing professionals have been much more effective at teaching people why they have to have all the new toys than pension communicators and economists have been at convincing them why they’ll need more money when they retire.

The view often heard from young workers is they can’t afford to save for retirement because they have student loans, they’re saving for a house or they have a young family. But they’re also using all the latest electronic gadgets, driving cool cars and wearing the latest fashions. The mid-career workers say they’re saving for higher education, paying down mortgages or juggling child care and elder-care obligations, but if pressed they’ll admit to buying $5 coffees and other “nice to haves.” It’s often not until the older workers (age 50 and older) start seeing the exit sign blazing starkly in front of them that they start to wonder if it’s too late to start saving.

So what can be done to change the tide of indifference and misconception? First, employers need to talk about pension plans in language that means something to the average person. Here’s an easy example: People don’t terminate, at least not unless they’re Arnold Schwarzenegger. They quit or they’re fired.

Second, create powerful images that communicate the message instantly. The audience needs a vision of the future that’s relevant to their experience today, so give it to them. Many Canadian seniors, particularly women, live at or below the poverty line because they have no personal savings. Many rely entirely on government assistance. A fortunate few may have a pension. What does that look like in real-life? Are these retirees having coffee at Starbucks, using no-name instant or reusing tea bags? Are they basking on the sandy beach of some southern locale or shivering in a small apartment because they have to economize on heating bills?

Too much pension communication shows happy, white-haired seniors or the iconic Muskoka chair on the dock. These images perpetuate the myth that everyone can anticipate a happy and secure retirement. What they should try, instead, is portraying real life.

After all, employers haven’t been that successful with the way they’ve done it to date, so what have they got to lose?

Jacqueline Taggart is a principal in the communications practice of the Toronto office of Morneau Sobeco. She can be contacted at (416) 385-2119 or jtaggart@morneausobeco.com.

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