How to entice younger workers to appreciate pensions
Car buyers get excited about many things: Stylish curves might appeal to a 20-something man, the ability to transport an entire hockey team might appeal to a 30-something mom. Even if people can’t afford the car of their dreams, they consider all available features before buying. But no one ever fell in love with a car by reading the user manual — it’s the glossy brochures, YouTube clips and car shows that draw people in.
This is not to deny the supreme importance of having a user manual in the glove compartment — car owners should never be without one. Just don’t rely on it to make the sale.
To convince potential car buyers to part with their hard-earned cash, advertising and marketing professionals conduct research to understand the wants, needs and price point of the target buyer. Then they design an appealing campaign that sells more cars.
So why then do companies take the user manual approach instead of being engaging and entertaining when it comes to pension plans — especially with younger employees who are just not interested?
The problem isn’t limited to company plans. There is broader societal interest in trying to engage younger people in financial matters in general.
The federal government established a task force on financial literacy in June 2009 to create a national strategy for strengthening financial literacy in Canada.
The task force defines financial literacy as “having the knowledge, skills and confidence to make responsible financial decisions.” Planning for retirement is included in the task force’s framework.
Identifying financial literacy as an essential life skill is increasingly relevant because pension risk keeps shifting to employees. Employees in a mandatory defined benefit (DB) plan today may be in a voluntary defined contribution (DC) plan with contribution choice tomorrow, along with the associated decisions, responsibilities and risks.
Missing the mark
Low levels of financial literacy help explain members’ lack of interest in company plans. On the sponsor’s side, though, pension communication often does little to stimulate interest or improve literacy. DB communication, in particular, sets out primarily to meet compliance requirements, focusing mostly on plan mechanics and simplified interpretations of plan text — much like a car’s user manual. It may be accurate and indispensable but it’s not delivering any appeal.
An annual DB statement or quarterly DC statement will deliver the numbers but does the plan member really understand, over the course of a career, how much money a pension is worth and how it fits within his lifetime financial picture?
Another problem for younger members is when special efforts are made and pension communication becomes interesting, they almost always target older employees. Retirement planning meetings, such as those offered by DC plan providers, are well-received by those for whom retirement and its associated financial concerns are looming. But for the younger employee, after hiring and orientation are complete, entire decades may pass before the next episode of meaningful pension communication comes along.
Many younger employees just don’t understand a company’s contribution on their behalf is, in essence, free money. Nor do they realize how this money fits within their financial present and future. The heralded advantages of youth — decades to contribute, the power of compounding — can be diminished or even wiped out if members get into a career-long habit of neglecting important pension decisions.
Pension plans are serious business but nowhere is it written pension communication to members cannot be entertaining and engaging. Success will require radically new communication strategies that cover the following:
Push the value of the pension
Take a look at retail banks that want to attract young customers. Successful campaigns to younger audiences speak the right language and reflect authentic goals, using an upbeat and fresh appeal — there’s not a Muskoka chair in sight.
True, plan sponsors don’t have retail budgets or sales targets. Yet younger employees could be enticed to learn more about their company pensions if the message was more about the value of free money and less about the mind-numbing intricacies of plan rules. One day, the pension plan will be as important to the employee as today’s paycheque.
Meet younger employees’ learning preferences
Take a look at advertisers that learn all they can about an audience’s likes and preferences, including what media will work best for their product.
The preferred source of financial information is via Internet search (such as Google), followed by family and friends, online forums and blogs, found the 2009 Investor Education Fund study Learning and Key Events for Age 20-34.
To engage younger employees, sponsors should understand their preferences, learning styles and levels of financial literacy and interest.
Target the right behaviours
Pension risk and responsibility continue to shift from sponsor to plan member but fiduciary risks and responsibilities do not. Employees who have been passive members in the past need help to transition into active financial consumers. Teaching members to take action is significantly different from just delivering information. Nowhere is this more important than for younger members who can correct course if they make poor pension or financial decisions.
Be fun and relevant
Tell stories about real people, use humour, be dramatic about the negative consequences of neglecting the pension plan and sell the lifelong advantages of all that free money.
And deliver it the way they want it: Online. Interactive discussions, education downloadable to an iPhone and planning tools can all be delivered through the intranet.
To entice young employees to fall in love with their pension plan, aim for the heart. Show them the shiny car, not the user manual.
Annie Massey is a principal in Mercer’s workforce communication and change business in Toronto. She can be reached at (416) 868-2981 or [email protected].
