Before communicating to staff about pensions and auto-enrolment, employers should ensure the language they use is clear and straightforward, avoiding jargon that employees may not understand.
If you read nothing else, read this…
- Communication should be clear and straightforward, avoiding jargon where possible.
- Messages could be tailored for different age groups and industry sectors.
- Jargon can put employees off saving for retirement.
A National Employment Savings Trust (Nest)/YouGov survey, published in 2012, which polled nearly 2,000 UK adults, revealed that pension jargon can put savers off, with 50% of respondents saying they find pensions harder to understand than other financial products.
Christopher Hopkins, managing director at employee communications consultancy Caburn Hope, says this is because the world of pensions is full of regulations and compliance. “Many organisations and pensions people feel the need to communicate large amounts of technical information,” he says. “This has to be done because of regulatory needs, but the problem is that employees simply don’t read it.”
Charles Cotton, performance and reward adviser at the Chartered Institute of Personnel and Development (CIPD), says there is a good reason why the industry has to use words such as annuity, accrual and accumulation. “It is a way of simplifying something for those who are in the know,” he says. “But it becomes jargon when discussing it with employees that are not.”
Use of language
Other jargon used in communicating pensions includes terms such as active or deferred member. Trevor Rutter, communication consultant at Like Minds, says: “What does that mean? It just means someone who is contributing and active in a pension fund, and someone who has left. It’s the old adage: why use 10 words when one will do?
“Regrettably, with pensions, it has to be the other way around. That way, it is easier to explain and employees will understand what a deferred member is.”
There is a debate that the word ’pensions’ itself has become a kind of jargon that disengages employees from saving. Jamie Jenkins, head of workplace strategy at Standard Life, says using a similar name to Australia’s My Super (superannuation) would help to engage staff.
“The word ’pensions’ is unexciting and boring,” he says. “Australians will talk about their My Super as their pension and there is an argument that it’s more exciting and much better-sounding than pensions.”
Different generations of employees may require different types of pension communication . Some, such as older staff, may be more accepting of jargon. Damian Standcombe, partner at consultancy Barnett Waddingham, says: “If an employee is in their late 50s or 60s, using jargon such as annuity or member outcome is okay because they have probably lived with it and can relate to it.
“But those in their 20s will have negative connotations with a pension because it’s so far away. It just won’t engage them. We have a habit in our industry of using the same language across all generations.”
The CIPD’s Cotton says the type of organisation an employee works for is a relevant factor. “If communicating to employees in financial services, the type of language used will differ from communicating pensions to the manufacturing industry,” he says. “It’s a different environment and they may be less pension- or financially savvy.”
Like Minds’ Rutter says communication is helped by using online portals, emails, printed booklets and letters sent directly to staff, but complex equations and percentages can still be confusing. “We are obsessed with describing things rather than explaining how it is a benefit to employees,” he says.
“Pensions can be complicated. Terms such as contribution rates, percentages and tax relief confuse employees. Employers need to talk about it in monetary terms because employees are more interested in money than percentages.”
Employers also need to choose communication methods that meet the requirements of their workforce. Laith Khalaf, head of corporate research at Hargreaves Lansdown, says: “One of the real bits of value pension providers and advisers can offer is helping people to make sense of their pensions. This means not only cutting down on useless jargon, but also communicating with employees in the way they like best, whether that is face to face, via a website, on a mobile application or by watching online video clips.
“Put simply, the easier you make it for people to engage with their pension planning, the more likely they are to do it.”
Publications provided by Nest and the Department for Work and Pensions are other useful tools for employers to use to help staff understand the language of pensions.
Auto-enrolment legislation requires employers to inform employees about the duties of both the employer and employee. The Pensions Regulator has detailed the legal requirements of what needs to be included in pensions communications, such as the auto-enrolment date, the value of contributions and full details of the scheme.
However, many organisations tend to use over-complicated language when communicating pension and auto-enrolment matters. Standard Life’s Jenkins says: “We need to rethink things, using plain language, positive tones instead of negative fear, to get employees to respond.”
With careful planning, employers can avoid cluttering such communications with language that should be avoided. Caburn Hope’s Hopkins says: “If organisations can start talking about pensions as being savings and an investment in future lifestyle, it will help engage employees. They want clear, simple, man-in-the-street type of stuff.”
Vincent Franklin: Pension communications should be clear, vivid and real
Auto-enrolment appears to take the pressure off pensions communication . If employees don’t have to choose to join and if their contribution levels are set, we can pack up our jargon-busters and go home.
But the industry can’t do that. If auto-enrolment is to become a successful pension provision, we have to help employees make good choices.
We should use words that normal people use and invite them to make the most of an opportunity. Instead, we are using words that keep people at arm’s length, such as drawdown and risk profile, and scaring them into taking responsibility.
We interviewed people for the National Association of Pension Funds (NAPF) conference last year. Bright people. Out of 17, only two could tell us what an annuity is. Worse still, they told us they felt “stupid”. We’ve done that to them. And when people feel stupid, they switch off. That’s not going to help them make the most of an opportunity.
It’s our responsibility to bring people into the conversation. We can do this by talking in a way that’s clear, vivid and real.
Clear means making sure employees get it first time. Asking them to navigate between advice and guidance is a perfect example of how our language creates needless confusion.
Vivid and real means making sure that what we say sticks in people’s minds. We need to focus on the benefit of saving, rather than the process. When we asked those people on the street what a pension is, they talked about their future, what life will look and feel like many years from now.
They didn’t go on about contribution levels or tax efficiency. But that’s where we keep starting the conversation. We need to start the conversation where those people would start it. And we need to use pensions language that makes them feel like they can join in.
Vincent Franklin is a creative partner at communication consultancy Quietroom.
Clear communication around pensions is vital, so that people are not put off saving for retirement. Knowledge around pensions is typically poor because the terms used – like annuity and income drawdown – are not commonly used in any other context. Perhaps calling them ‘guaranteed income’ and ‘variable income’ would help? Maybe then individuals would feel able to explore their options properly and make better-informed choices? Nonetheless, most people would benefit from a good-quality adviser to explain all their options before they make an irrevocable decision, such as, in some cases, purchasing a poor-value annuity.
What about the word pension itself?? It can mean the fund the plan or the income – so we should be clear which one we are talking about
Totally agree with Vince.
The language we use has done as much to turn people off saving for retirement as the media has done with all of their horror stories.
And in a DC world it’s about so much more than a pension (saying ‘annuity’ is even worse). People have a choice of how and when they use their savings so as a generic phrase I tend to say ‘saving for later life’. Four words rather than one but says what it is.
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I completely agree that some terms can be confusing since they are not used in every day life. People generally need to feel more engaged with the process of saving for their later years and making things easier for them to understand would help, particularly those who have just entered the workplace.
The difficulty is that there is only so simple you can make things as there are many terms which are specific to pensions which people need to become familiar with. Organisations should try to complete an exercise where they de-jargon communications regarding pensions to their employees but also be able to point people in the right direction for further information. Organisations also have to be careful that their communications surrounding this topic are appropriate to the audience as mentioned in the article, many older people are more comfortable with terms used so changing the wording could lead to confusion.
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