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Heywood Pension Tech

Heywood’s recent Buy-in Buy-out webinar featured a data-driven dialogue between Chief Strategy Officer, Chris Connelly, and Julia Fox, Lead Consultant at Quietroom.

During an insightful discussion they delved into the significance of data in mastering member communications during the de-risking process, how providers can enhance member engagement, and all you need to know when it comes to crafting a member-centric communication strategy.

The crucial role data plays in driving de-risking dialogue

With an increasing number of schemes turning to buy-in and buy-out strategies, Chris posed the question - why start with data? He went on to explain that as we explore the ins and outs of de-risking, it becomes clear that data is the cornerstone of effective dialogue with members, placing it at the foundation of the entire de-risking process.

A typical pension scheme can lack important data, such as spousal information, which can make it difficult to accurately calculate liabilities. Chris commented, “When projecting the future life of your pension scheme, paying spouses once the members have died is a big chunk of your liability”.

Collecting this data can be a challenge. This is particularly true when using paper communication which is slower, costly and can have a response rate of as little as 20%. There are other channels available such as email which is far quicker and proven to be more likely to engage members, but many schemes don’t have personal email addresses for their members.

Read more: Being prepared in today's de-risking market 

Chris followed up “It doesn’t matter what our research tells us about what members want to be told or understand, if when you tell them the letter or email doesn’t arrive”.

There are solutions on the market that help pension providers source personal email addresses in bulk. This approach not only reduces cost and friction but also enables the collection of additional data, such as household makeup and spouse information. This strategy is widely used across various industries and has proven to be effective in enhancing member engagement.

Pension risk transfer solutions

Refining member communication during the de-risking process

When it comes to communicating with members, pension schemes need to be vigilant of behavioural changes. Research indicates that people view their pension, particularly DB pension, as a reliable safety net, unlikely to change. However, the process of de-risking introduces a significant shift in this trust.

During a buy-out, the assets and liabilities of the pension scheme are transferred to an insurer. This transition can create a sense of uncertainty among members, as they grapple with a perceived instability of their pension. This feeling can be further exacerbated amid a cost-of-living crisis, where financial security is more paramount. According to Julia: “From the outset, pension schemes need to establish themselves as a trusted voice.”

Misinterpretation of pension changes is high. Julia explained that during Quietroom’s research the term ‘winding up the scheme’ caused panic among members. She said “It’s crucial to have a strategy in place before communicating with members. Members need to feel secure with their pensions and know that pension schemes are trustworthy, demonstrating that they are in control and confident.”

In addition, members often have a general understanding of their pension but may become uneasy when faced with changes or the admission of incomplete data.

Chris adds “That is another good reason to find more automated ways of improving member data rather than just going directly to them.” There are services that allow you to ensure that you hold the most up-to-date personal and contact information. It’s also worth remembering that whilst emails can be quicker, cheaper and more engaging, you will still need their home address as it remains vital for those elements of the process that are still mandatory paper communications.

Pension schemes face challenges when writing to members. When writing to ask for information, there is typically only a 20% response rate. Chris went on to explain that pension providers should consider the benefits of email over paper communication. Email not only tracks open rates and engagement, but through analytics, you can measure other key metrics such as time spent on a page.

These insights help gauge the effectiveness of your message, delivering you data points not available via paper communications.

When it comes to email, Julia shared top tips for clear communications during buy-outs:

  1. Personalisation and Clarity: Use a recognisable sender’s name instead of ‘noreply@updates.company.com’. The subject line should contain a clear call to action, as only the first few characters may be visible on mobile devices.
  2. Content and Security: Keep email content concise with a clear header, bullet points, and informative links. Secure and encrypted email communications can ease the transition of communication channels during the buy-out process.
  3. Trust and Verification: Including links to the sponsor’s website can enhance the member’s trust and provide a means for them to verify the legitimacy of the communication.

Crafting a Member-Centric Communication Strategy

Designing a member-focused approach to communication starts with understanding their needs and behaviour. Julia adds that the fundamentals in de-risking communications are context setting, summarising key points, and personalisation.

There are vital areas that require personalisation, for instance, members can have several DB pensions from different employers. In this case, it is essential to show the member that you are aware of this and can personalise their communications accordingly.

Furthermore, this is particularly important with spousal data. Schemes should hold this information and relay it back to members. Julia advises to “use names, and not make assumptions about people”. Refrain from using the terms ‘husband’ and ‘wife’ as this may not be applicable. The member may be in a civil partnership or unmarried.

Chris recommends creating accessible and inclusive communications. Don’t make assumptions about capability, but rather record your member’s requirements and adjust your communications, providing different formats if required.

Understanding what drives member behaviour, such as why certain subject lines aren’t motivating users to open emails, can help adapt the strategy.

Watch now: Mastering member communications in de-risking

Julia emphasises: “If you’re not holding the right data, either for the transaction or the communication, then you don’t know your members. It’s expensive not knowing your members.”

For instance, when a scheme skipped the member research phase during a buy-out, its members didn’t feel like they had any ownership or understood the changes. The resulting lack of understanding and ownership felt by the members led to costly and time-consuming consequences, forcing the scheme to restart buy-out communications.

As we move into 2024, the bulk annuities market is expected to remain buoyant. As pension schemes embark on their de-risking journey, keeping members informed every step of the way is critical, and it all starts with data, being able to easily connect with members and shaping communication strategies to their needs. It’s from this foundation you can enhance member engagement by transforming comprehensive data into an insightful strategy and in turn, demonstrates your credibility and establish you as a trustworthy source in the de-risking process.

In summary, data plays a pivotal role in de-risking. It’s the foundation of effective communication, helping schemes to connect with their members accurately and meaningfully. When it comes to trustworthy engagement with members: Show them that you know them.

Read more: Effective member communication in pension buy-ins and buy-outs


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