Engaging Employees to Contribute Better to Retirement Savings

August 14, 20158:45 am992 views

Engaging employees to help them maximise their potential on job and contribute to retirement savings can be quite a task for HR managers to accomplish. Enhanced offerings to make it easier for employees to save for retirement, combined with the growing economy, have stimulated employee contribution rates and account balances.

From auto-enrolment and step-up contributions to managed accounts and individual financial counselling, from Smartphone/tablet apps to easing service requirements for plan entry and immediate plan matching, the focus on “ease of use” is helping to move the engagement needle in the right direction.

According to Deloitte’s 14th “Annual Defined Contribution Benchmarking Survey,” there is no single solution to engaging employees, and new, creative methods are critical to address the varied needs of retirement plan participants. It is imperative for plan sponsors and providers to continue to work together in developing and offering these tools that make it easier for employees to save and plan for their future retirement.

This year’s survey was conducted in association with International Foundation of Employee Benefit Plans (IFEBP) and the International Society of Certified Employee Benefit Specialists (ISCEBS) in USA. The findings revealed the reason for employee plan participation this year was the personal desire to save for retirement, surpassing last year’s top reason of taking advantage of the company match.

Although only 19 percent of plan sponsors surveyed still feel “most” employees are or will be ready for retirement, average account balances of participants grew in 2015 to $99,011, up almost 4 percent from $95,227 in 2013-14. Employee contribution rates also increased, with the median actual deferral percentage for non-highly compensated employees rising to 5.9 percent, a 13 percentage point increase over last year.

Year over year, the research has found there is no single answer to how to best to engage employees in saving for retirement. Lack of awareness or understanding was the leading reason for why employees do not participate, cited by 34 percent of employers surveyed. To address this concern, plan sponsors and providers are using multiple tactics to customize, target, and deliver messaging to encourage retirement savings and raise awareness of the amount of income needed in retirement.

See: New provident fund law eases contribution limit

As a top reason for plan participation, second only to personal desire to save for retirement, the match remains a critical retirement plan engagement tool for employees. Consistent with findings over the last three years, the survey showed nearly all plan sponsors (94 percent) surveyed are offering some form of matching or profit-sharing contribution in their defined contribution plans, with 6 percent increasing the match.

With employee engagement increasing, it is required by employers and plan sponsors to continue to evaluate new methods of stimulating interest in boosting the workplace culture of savings for retirement.

“It’s critical that participants gain a clear picture of the savings they will need to meet their individual retirement goals—and it’s just as important for plan sponsors to do all they can to help their participants prepare for their retirement,” said Michael Wilson, chief executive officer, IFEBP and ISCEBS.

Providing individual financial counselling/investment advice is another means to support employees in navigating the complex world of investments. Many organizations are increasingly providing a valued incentive for newly hired employees, this smoothing the path for getting them engaged in retirement savings. For each of these tactics, the objective is to tailor the interaction to employee preferences and generate greater engagement.

Given that providing the right investments is the number one priority, plan sponsors continually assess the total number of investment options offered. Increasing the savings rate in defined contribution plans is an important strategy for employees in reaching their financial goals in retirement.

Another tool used by employers to help employees prepare is retirement readiness assessments, where expected income replacement ratios are determined for employees in retirement.

Annuities are another frequent topic in retirement savings discussions, but there continues to be limited interest from plan sponsors. In-plan retirement income products allow participants to protect longer-term investments against loss, while maintaining the opportunity for investment growth. At this point, 2% of plan sponsors have added this option, with another 11% looking into it.

Plan sponsors are clearly seeking to put the employee at the centre of communication, via in-person meetings where questions can be asked, and through targeted messages that speak directly to the participant. Working in concert, these communication vehicles are designed to make it easier for the employee to get engaged and stay engaged in saving for retirement.

Also read: EPF launches plan to boost retirement savings for low-income earners

Image credit: flickr.com

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