24/10/2011

By Ann Flynn, Head of Corporate Marketing, Standard Life

The third reading of the Pensions Bill has just taken place and it is set to transform the UK pension landscape. From 2012, larger employers will automatically enrol eligible employees into a qualifying workplace pension scheme, which aims to encourage more workers to save for retirement. Smaller schemes are being given a slightly longer lead time, before making the changes.

But the scale of what could be achieved across the board is dramatic. Our research shows that auto-enrolment could create an additional six million pension savers, many of them working within small or medium sized businesses, adding £12.5bn annually to retirement savings by 2017, helping to close the savings gap and ensuring more employees are saving for their retirement. But carefully designed and clear communication lies at the heart of this success and employers, along with the long term savings and investment industry, have a vital role to play in this respect.

Our research also shows that 82% of employees in the £17-45K earning range who would be auto-enrolled said they wouldn’t opt out of the scheme if given clear information about its benefits. Here are some guidelines on communication that our research shows will help to develop employee engagement, so they value their workplace pension and help to make auto-enrolment a success.


- As part of the new regulations, employers will be required to contribute 3% to employee’s scheme. Clearly this has real implications for many businesses, particularly smaller ones. It also makes it even more important that employees are aware of that contribution and truly value the investment from their employer. So remind employees what they will miss out on if they choose to opt-out. Those we surveyed did not like being told that they would not benefit from free employer contributions if they opted out.

- Present the employer contributions and tax relief together as matched contributions forming a powerful incentive.

- Highlight that investing in a pension can be a good deal. A simple illustration of the multiplying impact of long term savings on a £50 contribution can be very impactful.

- Where possible, show employees round numbers, not just percentages. For example, statement such as “4% of your annual salary over £5,700” should be complemented by an illustration such as “£50 a month for someone on a £20,000 annual salary”.

- Show employees more incentives to save more than the minimum. For example, show how an increase in their contribution leads to an increased contribution rate from Government.


We understand that meeting the requirements of auto enrolment is challenging for companies, particularly in the current economic climate, but it is a real opportunity to help put in place a sustainable pensions system here in the UK. By developing clear communications and providing employees with the support they need, a huge difference could be made.


The source of all statistics in this report is Standard Life’s Keep on Nudging report, published October 2011.


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