It’s amazing how the simple phrase, “Show me the money,” from the movie "Jerry Maguire," has become ingrained in our language. In fact, it’s become a motto for employees everywhere seeking pay increases. But it also characterizes the sentiment younger employees have about pension value and communication.
You’re probably thinking, OK — good movie, but what’s it got to do with pension communication? Well, everything. Employers are finding that to communicate the value of a pension to a 20-something employee, you’ve got to show them the money. But how? And more importantly, why?
Let’s think about the “why” first. Understanding why you need to communicate in certain ways goes to understanding your employees’ expectations of you, the employer. And as we all know, employee expectations are driven not only by their ages, but also by the reference points in their lives: world events, technology, work experiences and even childhood heroes. Groupings of these reference points have created the now familiar generational labels: veterans (born between 1922 and 1943), boomers (born between 1943 and 1960), Xers (born between 1960 and 1980) and nexters (born after 1980).
So what do Xers and nexters want from you? Challenging work, good pay, stimulating environment, development opportunities, and a pension plan at retirement. Wait a minute — that last one doesn’t quite fit. What employees want from an employer these days has everything to do with here and now, and almost nothing to do with some point in the future, 20 or 30 years out.
Does this mean younger employees are not interested in retirement planning and pension benefits? Not at all. They are very interested in them, if they understand them and if they have some control and choice over them. (A big contribution on the employer’s part doesn’t hurt either, but any employee will ask for that, not just younger employees.)
Now let’s think about the “how.” In general terms, the plan design itself communicates volumes before you say a word. Got a defined benefit (DB) plan? Great. But if current predictions about the number of times employees will change jobs hold true, it doesn’t matter because your young employees won’t be around to experience it.
Under a DB plan, even considering design and formula variations, the true value begins to kick in when there are plenty of years of service and the employee is getting up to that magical early retirement age. There’s probably a good early retirement subsidy, maybe a hold-harmless provision, and possibly a high salary, given that the employee has been around for a while.
So, for longer service employees, a defined benefit plan works pretty well. But for shorter-service employees, not so much.
How about a defined contribution (DC) plan? Will that work better for people who leave before retirement? DC plans are often considered “more portable” than DB plans, but a key point to remember is that many pension plans, DB or DC, are vested after two years. So if your employee doesn’t even make it to two years, he or she is leaving with employee contributions (if any) plus interest only.
Once you’re past the vesting point, both types of plans are portable, but what varies is the value that you can take with you when you go. In most cases, the value you take from a defined contribution plan, if you leave before retirement, is pretty easy to communicate and may hold more appeal for your 20-something employees: it’s what has gone into the plan and any investment returns those contributions have generated. Under a DB plan, the calculations of that value and the related communication can be a little more complex.
Where does this leave us? Well, if you get to choose the type of plan that generally holds more allure for younger employees, then a DC plan might be the one to pick. But another important point to consider before you select a design is whether or not you need to mandate employees’ participation in a pension plan at all.
In almost every kind of pension research I’ve been involved in, younger employees have said, “Don’t make me join the pension plan, give me the money instead.” Whether your organization urges participation in a pension plan, offering options is part of a bigger rewards philosophy. Giving employees the choice to participate or not — now that appeals to Xers and nexters.
But when your plan design is chosen and you really need to communicate the value of a plan or plans, then you need to choose the media that works for your audiences. Knowing your audience is the foundation of any communication plan, but in general terms, it’s no secret that the Xers and nexters lean heavily on the electronic communication medium. Don’t make them read, let them “click.”
Finally, when all is said and done, communicating pension value to young employees is a challenge. What they want from your organization is more immediate than what they might get from a pension plan in the long run. To get your pension design team to buy into this, maybe we need the writers of Jerry Maguire to redraft the script based on what employees are really thinking: “Don’t show me the money — just give me the money now.”
Maggie Thompson senior consultant in the communication strategies practices of Aon Consulting in Calgary. She can be reached at (403) 303-1514, or by e-mail at maggie_thompson@
aonconsulting.aon.ca.
You’re probably thinking, OK — good movie, but what’s it got to do with pension communication? Well, everything. Employers are finding that to communicate the value of a pension to a 20-something employee, you’ve got to show them the money. But how? And more importantly, why?
Let’s think about the “why” first. Understanding why you need to communicate in certain ways goes to understanding your employees’ expectations of you, the employer. And as we all know, employee expectations are driven not only by their ages, but also by the reference points in their lives: world events, technology, work experiences and even childhood heroes. Groupings of these reference points have created the now familiar generational labels: veterans (born between 1922 and 1943), boomers (born between 1943 and 1960), Xers (born between 1960 and 1980) and nexters (born after 1980).
So what do Xers and nexters want from you? Challenging work, good pay, stimulating environment, development opportunities, and a pension plan at retirement. Wait a minute — that last one doesn’t quite fit. What employees want from an employer these days has everything to do with here and now, and almost nothing to do with some point in the future, 20 or 30 years out.
Does this mean younger employees are not interested in retirement planning and pension benefits? Not at all. They are very interested in them, if they understand them and if they have some control and choice over them. (A big contribution on the employer’s part doesn’t hurt either, but any employee will ask for that, not just younger employees.)
Now let’s think about the “how.” In general terms, the plan design itself communicates volumes before you say a word. Got a defined benefit (DB) plan? Great. But if current predictions about the number of times employees will change jobs hold true, it doesn’t matter because your young employees won’t be around to experience it.
Under a DB plan, even considering design and formula variations, the true value begins to kick in when there are plenty of years of service and the employee is getting up to that magical early retirement age. There’s probably a good early retirement subsidy, maybe a hold-harmless provision, and possibly a high salary, given that the employee has been around for a while.
So, for longer service employees, a defined benefit plan works pretty well. But for shorter-service employees, not so much.
How about a defined contribution (DC) plan? Will that work better for people who leave before retirement? DC plans are often considered “more portable” than DB plans, but a key point to remember is that many pension plans, DB or DC, are vested after two years. So if your employee doesn’t even make it to two years, he or she is leaving with employee contributions (if any) plus interest only.
Once you’re past the vesting point, both types of plans are portable, but what varies is the value that you can take with you when you go. In most cases, the value you take from a defined contribution plan, if you leave before retirement, is pretty easy to communicate and may hold more appeal for your 20-something employees: it’s what has gone into the plan and any investment returns those contributions have generated. Under a DB plan, the calculations of that value and the related communication can be a little more complex.
Where does this leave us? Well, if you get to choose the type of plan that generally holds more allure for younger employees, then a DC plan might be the one to pick. But another important point to consider before you select a design is whether or not you need to mandate employees’ participation in a pension plan at all.
In almost every kind of pension research I’ve been involved in, younger employees have said, “Don’t make me join the pension plan, give me the money instead.” Whether your organization urges participation in a pension plan, offering options is part of a bigger rewards philosophy. Giving employees the choice to participate or not — now that appeals to Xers and nexters.
But when your plan design is chosen and you really need to communicate the value of a plan or plans, then you need to choose the media that works for your audiences. Knowing your audience is the foundation of any communication plan, but in general terms, it’s no secret that the Xers and nexters lean heavily on the electronic communication medium. Don’t make them read, let them “click.”
Finally, when all is said and done, communicating pension value to young employees is a challenge. What they want from your organization is more immediate than what they might get from a pension plan in the long run. To get your pension design team to buy into this, maybe we need the writers of Jerry Maguire to redraft the script based on what employees are really thinking: “Don’t show me the money — just give me the money now.”
Maggie Thompson senior consultant in the communication strategies practices of Aon Consulting in Calgary. She can be reached at (403) 303-1514, or by e-mail at maggie_thompson@
aonconsulting.aon.ca.
