Imagine your average 16- to 19-year-old, and a certain individual and set of priorities springs to mind. Saturday job wages go straight to funding fun with friends, and the longest-term it probably gets is saving for festival tickets, holidays or, at the most serious end of things, a car. For this age bracket the future is still hazy, with thoughts of a pension as unlikely to register as thoughts of gardening, bingo and bowls.
Or are they? In fact the priorities of those currently aged 16 to 19 – Gen Z – are somewhat different than those that have gone before, or from what you might expect.
Research by employment services firm Adecco, published in June, found that more than a third (35%) of Gen Z respondents aged 16 to 19 expect a pension as standard with their first job, suggesting this generation is entering the workplace with a world view that values security in work and retirement. The research found that a pension is more appealing to Gen Z employees than short-term perks such as gym memberships and free technology.
Patricia Hind, director of Ashridge Business School’s Centre for Research in Executive Development, says: “They expect to earn more than their parents, they expect time off to travel, and they expect free digital devices in order to be able to do their jobs properly. And yes – they expect a pension from the word go. Understanding how to manage this new generation [and their pension needs] is critical for business’s survival in the long term.”
As a result of this growing expectation, employers need to focus on a savings mindset, introducing new starters to workplace pensions and other schemes during onboarding. They also need to carefully consider how they make this introduction. After all, this is a generation that’s grown up in an age of technological dependency and so will be more at ease than anyone else with a future of electronic personal finance. A focus on digital communications will be key.
Many employers are embracing social media platforms, such as Tibbr or Yammer. This method has worked well for Centrica, which uses Yammer to create formal polls to spark interest, then to host debates, and then to just generally communicate its pension offering, including educational events.
Jeremy Beament, directorat financial education provider Nudge Global says it “makes sense to use independent technology” to deliver guidance and education for Gen Z employees around their pensions options, with a focus on peer-to-peer interaction.
“We find that Gen Z are massive believers in what we call the shared experience,” he says. This means that we should encourage Gen Z workers to use social media to share with their colleagues questions they may have, how much they are contributing and what they thought about the service they were offered by the pension provider. It will increase confidence in the system and ensure more employees take action.”
Personalisation is also emerging as a key strategy in engaging all employees, including Gen Z, with that aspect of saving for a pension that most chimes with them at their particular life stage. For example, back in 2014 Telegraph Media Group increased the number of employees who make additional voluntary contributions (AVCs) into its trust-based defined contribution pension by sending out personalised newsletters.
At McDonald’s there are plans to offer Gen Z employees different booklets of information upon entering the organisation. “While we do not do anything different as a means of communicating to different employees, there is research that shows they have different needs,” says reward manager Neal Blackshire. “It is something that we are thinking about, potentially this will involve the use of different booklets for employees and putting more specific information on our online staff portal.”
Retail and brand consultancy Fitch has deployed Nudge Global’s Quantum technology, which uses HR and benefits data to profile employees and pre-empt their financial needs as their circumstances change and legislation evolves. It provides its workforce with personalised and predictive education about their finances, including pensions, which they receive via home and work smartphones.
Lesley Brady, global HR director at Fitch, says that although Gen Z might be interested in the idea of saving for future security, it’s still important to pitch the proposition just right. “We can get younger people to start thinking about saving by putting it into the context of what is important to them right now,” she says. “So if we engage them by helping staff think about getting on the housing ladder, or saving for that car or holiday they desperately want and showing them how they can achieve it, we can start them forming the good habits that will last throughout their lives. That is why financial education is so critically important early in the employee’s career.”
And that’s why many employers now complement engaging the younger generation using financial education with offering workplace savings platforms. British fine jeweller Boodles saw almost a quarter (22%) of its pension scheme members increase their contributions following the launch of such a platform. The platform, provided by Hargreaves Lansdown, offers staff access to a group self-invested personal pension (SIPP), a cash individual savings account (ISA), a stocks and shares ISA and an investment account.
Yet while new platforms and whizzy new ways of promoting these are definitely on the rise, many are also still alert to the power of traditional strategies in engaging younger staff. Take Carlsberg UK for example, where employees value both face-to-face and online pension communications, says the brewery’s compensation and benefits manager Nick Court.
“For Gen Z I have found that you need to keep it simple – so that the value of the offering is understood immediately in terms of what’s in it for them – and then empower them to find out more themselves by ensuring that the resources are online and accessible when they want them,” he says. “A balance of face-to-face and online works really well for things that are naturally more complicated or new.”
But it is the language that employers use to address different generations that is the most important aspect, says Nick Throp, co-founder of employee communications consultancy Like Minds. “Perhaps the most important thing to remember when you’re communicating to this group is not to stereotype them,” he advises.
So Gen Z, like any age group, requires a non-judgmental, open-minded approach that takes into account their unique needs as individuals, rather than treating them as part of a homogenous demographic. A combination of new media, personalised education and platform offerings, and old school face-to-face contact is likely to hit the spot.
Most importantly, employers should be mindful of their duty of care towards these employees, who are more likely than the generations before to face a changeable pensions landscape in the years to come. While the government’s plan for children to be taught about money, introduced in 2014, goes some way to helping Gen Z, employers must step up to their responsibilities here too.
“This generation will be working into their 70s and are acutely aware of the need to take personal responsibility for their finances as they age,” says Hind. “There are more changes to come. In Europe there is no way of knowing what governments will offer pensioners 50 years from now. Gen Z will watch the next decades warily, work to manage their futures, and work well for employers who will support them in doing so.”