Greater personalization when it comes to defined contribution engagement would improve independence and flexibility among participants, said speakers at the annual Pensions and Lifetime Savings Association conference held last week in Liverpool, England.
More than 70% of surveyed individuals think that having an individual target of how much they should save for retirement would encourage them to put away more, according to PLSA research, which was presented at the conference. At the same time, only 3% of people believe they will have adequate income when they retire, the survey found.
Guy Opperman, U.K. minister for pensions and financial inclusion, reiterated during the conference that the government is committed to starting the pension dashboard, an online tool that will hold all a participant's retirement savings data in one place. "Pension dashboard has taken longer than I would have liked," Mr. Opperman told conference delegates. But "We are making a tremendous progress on the dashboard and it is going to be a game changer," he added.
Oher U.K. regulators also are looking to make saving more personalized.
The U.K. Financial Conduct Authority, following its retirement outcomes review, is proposing to roll out personalized pension "passports," said Elisabeth Costa, director of consumers, economic growth and energy at the Behavioral Insights Team, a social purpose company owned by the U.K. government.
To help savers set retirement targets, Martijn Vos, managing director pensions and insurance at Ortec Finance, said: "It will be really good if governments supported a goal- based approach. It would be great to have a source of all necessary information in one place where you can download it."
Helen Dean, CEO of the £3.8 billion ($5 billion) National Employment Savings Trust, London, speaking at a separate panel from Mr. Vos, said: "When you get people to (set targets) it is a powerful tool to act. At NEST, we like the idea and want to try the idea of personal targets. But as an industry we need to go further (and) start thinking (about) the overall financial position of the individual in the context of the overall retirement saving."
But speakers agreed that financial wellness programs also could help to maintain a higher level of engagement.
"We know that financial resilience is very low," Ms. Dean said. "Much of the population in the U.K. struggles with financial issues and … that it impacts on their health and sense of well-being. Out of 10 million people that have been automatically enrolled, over the last six years we estimated that a quarter have no rainy-day savings at all. And half has less than £500 saved away."
"Emergency liquidity could be one of the reasons why you stop saving … and you never start saving again," she said. "We wonder at NEST if it is in our interest to encourage people to save aside for a rainy day into emergency funds."
NEST Insight, the research unit of NEST, is beginning to test the sidecar account, an emergency savings account that sits alongside a retirement account. "We'd love to see if it creates consistency and reduced indebtedness and reduces the sense of financial stress" Ms. Dean added.
However, Emma Douglas, head of DC solutions at Legal and General Investment Management and PLSA policy board chairwoman, said, "We are not keen on hardship loans." Lessons from the U.S. show participants using hardship loans deplete their resources and never bring their savings back to the original level, she said.
Instead, the PLSA wants to see total contributions increase to around 12% so employees are able to retire once they have achieved the target retirement outcome.
"It's not going to be good for employers if the employees can't afford to retire," Ms. Douglas said.
"We want to get to 50/50 split between the employer and employee. It is more achievable. If the employee is matching, they will have more incentive to stay at the company," she said.
Blair Turnbull, managing director, U.K. and international digital and retail direct at Aviva, said "We have to create (bundled employee) programs with discounts," to keep participants engaged. "We have to make their experience better and reward loyalty," he said.