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How to speak to young people about pensions

In an ideal world, everyone would prioritise their pensions and plan for a perfect retirement. Unfortunately, this is far from reality, particularly among younger workers.

Important notes

This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in. These articles are intended for employers and HR professionals, not for individual investors.

Over a third of young people either have no pension or don’t know if they have one, according to a recent study. It’s no surprise that younger employees aren’t thinking about life after work, with so many other milestones yet to happen. But they may be missing out on the benefit of early saving, and the compound interest that comes with it. The later they leave it, the less time their money has to grow.

And with new legislative changes which will see 18- to 22-year-olds automatically enrolled into workplace pensions for the first time, it’s even more important we work out how to engage the younger generation.

We’ve come up with some ideas to help.

Get their buy in

Discussions about the environment are increasingly entering everyday conversation.

Research shows that climate change is a particular stress point for Gen Z (those born between 1997 and 2012), with 69% actively trying to minimise their impact on the environment. But do younger workers understand the links between their pensions and Environmental, Social and Governance (ESG) issues?

Gen Z want to know if their pension is being used to encourage companies to make a positive ESG impact. A recent study showed that had they known this, nearly nine in 10 (89%) of young workers would’ve wanted to be more involved in their pension and investments.

So there’s a real opportunity here to promote any environmentally friendly investments available to members. Why not get their buy in through something important to them?

If the investments in the pension don’t integrate ESG, it could be worth looking into how that can be changed. Keep in mind that investments can go down as well as up in value, so members could get back less than they invest.

Serve immediate needs first

Just talking about retirement is unlikely to capture a young worker’s attention. Gen Z savers are more likely to be focusing on saving for a house, a holiday, or a life event that’s due to happen long before they stop working.

If these more immediate financial needs aren’t being met, it’s unlikely young workers will even begin to think about retirement.

Employers can help by offering workplace savings accounts alongside a workplace pension. Workers can then redirect pension contributions into more accessible savings products, like an ISA or general investment account.

Communicating the benefit of these accounts to employees, alongside financial education on topics like budgeting or saving for a house deposit, should stir some interest in younger workers. And guiding them towards our Five to Thrive initiative will help to raise awareness about how important financial resilience is.

The idea is then that engagement encourages engagement. If employees start engaging with their finances on a more immediate level, they’re more likely to think about their longer-term needs.

What’s in it for them?

With the cost of living proving a challenge for many, young people prioritise value for money and maximising return for their hard-earned cash. You can’t normally take money from a pension until age 55 (rising to 57 from 2028), so what’s the value in contributing to their pension now?

It’s worth highlighting to younger workers the tax benefits of pension contributions, meaning they could be worth more than cash in their bank account. Keep in mind that tax rules can change and benefits depend on personal circumstances.

And do they know about compound interest? Examples to illustrate compounding can be really persuasive when people see how beneficial it is. And how important it is to start saving early.

With retirement so far away, younger employees might not be aware of how much money they might need after work. And that it’s unlikely they’ll be able to live off the UK State Pension alone. The Retirement Living Standards provide useful figures about how much money is needed for three different standards of living. By putting some context to their pension contributions, people are more likely to realise their importance.

Make it manageable

As well as thinking about what to communicate to employees, it’s important to consider how you communicate too.

Young people are surrounded by social media channels which use short videos and snappy messaging. It’s good to follow this idea when communicating about pensions and finances. Keep messaging clear, concise and as bite-sized as feasible.

Providing information in short bursts mean people are far more likely to engage, and at a pace they’re comfortable with. Some pension providers may already have content like short videos and flyers in their remit, so it’s worth asking them about it.

More on our Financial Wellbeing programme

Make it fun

Gamification is a good way to combat the jargon and complicated processes associated with pensions.

Incorporating games into sessions or team meetings about pension topics can really increase engagement. It offers an alternative way for young members to learn about topics they wouldn’t usually read up on, allowing a degree of interaction. It may even appeal to the competitive side of some, increasing their desire to learn.

And it doesn’t have to be a simple question-and-answer exercise. You could emulate popular TV gameshows with how you lay out the questions, even creating slides to go with it. It’s a good way to do a knowledge check at the end of a session, so that participants leave stimulated and engaged.

Pensions are a hard message to push to young workers with retirement a mere dot in the distance. But with the right communication, we have a much better chance of engaging them to plan for a good retirement.

This article is not personal advice. If you are unsure of a course of action, please ask about advice.

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Important notes

This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in. These articles are intended for employers and HR professionals, not for individual investors.

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