In “Save Your Retirement: Simplifying the Contribution Process for Retirement Savings,” Corporate Insight points out that even before participants can decide whether to increase their contribution rates, they must know how much they’re currently contributing. The report assesses the methods through which providers allow participants to increase their contribution rate, and the resources and promotions devoted to the topic.
To increase contribution rates and drive participation, plan sponsors should be looking at several things, Drew Maresca, head of retirement research at Corporate Insight, tells PLANSPONSOR. As long as the investment lineup is one that the plan sponsor thinks is serving participants well, then the most critical piece is putting the participant’s contribution rate right on the home page.
“A lot of participants visit the site infrequently, maybe five or six times a year,” Maresca says. “You want important data right there.” Equally important, he feels, is an embedded retirement projection on the home page so the participant can see the rate and what his future retirement might look like, as long as these factors remain stable. “It can be jarring to a lot of people, seeing what their expenses and their retirement might look like,” he says. Projection is critical because it can really spur participants to take positive action.
Messaging and imaging do not have to be as formal as a precise forecast, Maresca says, but a phrase or comment that simply gets the ball rolling. “People may not have any expectations when they visit,” he points out, “but Schwab says, ‘Maybe you should think about increasing your rate.’ It puts the suggestion out there almost as a subliminal message.”
Unfortunately, most firms do not outwardly encourage participants to increase their rates. About one-third of firms (29%) use messages or images on the home page to encourage increasing the deferral rate. However, many firms offer commentaries and calculators that inform participants about the importance of increasing deferral rates.
A Clear Message
Of the 17 firms Corporate Insight monitors, 27% allow participants to see their contribution rates on the home page. Participants are one mouse click away from this information on the sites of another 20% of the firms. The 15 firms that allow participants to view and change rates from the site all provide access to the current rate within three clicks.
The ability to alter contribution rates is also key. Three sites do not allow participants to make changes to rates on the site, but the remaining 14 do, in a function that is accessed easily. Vanguard allows participants to make rate changes directly from the homepage, requiring only one click to do so. In total, 86% of firms allow participants to alter their rates with three clicks or less (from the homepage.)
Calculators are available on the majority of Retirement Plan Monitor sites; 53% of firms provide access to a calculator that determines the effects on a paycheck of changing a deferral rate. Conversely, HTML pieces are relatively scarce. Eleven of the 17 firms feature an article, but of those 11, four offer only one item. Multimedia resources are intermittent. Multimedia files are offered by only 24% of the coverage group.
One surprising finding was awareness of mobile apps. Participants aren’t aware that they’re out there, Maresca feels. “Providers are not doing a really good job putting out the word about their capabilities.”
Providers should also offer a range of resources— articles, PDFs, streaming multimedia and calculators—to educate participants about contributions and encourage saving at higher rates. These promotions may be the only chance to alert participants that their contributions might not be enough to adequately fund their retirement.
What the Future Looks Like
Retirement is incredibly expensive, with both costs that are planned and unexpected. Firms should proactively encourage participants to increase their contribution rates and explain this on the account homepage, reminding participants that increasing contribution rates is an integral part of retirement savings.
The six firms that feature homepage promotions do so effectively, relying upon prominent images or embedded data. For example, Schwab embeds an image on its participant site homepage that bluntly states, “Saving a little more today could make a big difference tomorrow.”
Promotion is important for increasing contributions. Participants who were auto-enrolled into a plan or who contribute the previously standard 5% may think their retirement plans are in good shape, but in many cases, this is not true.
Most people who log onto a retirement provider’s site do so to check their balance (87%), Maresca says. About one-third of participants log on to change their balance, and 28% logged on to use tools and calculators. The only other actions are researching investments or engaging with educational site content, such as videos and podcasts.
While these are sometimes promotional, Maresca says they can provide some useful content, such as tips about the need to review the plan regularly or increasing a contribution rate after receiving a salary raise. “Most people are not quite engaged enough,” he notes, so educational content can be beneficial to participants.
Corporate Insight advises firms to do everything possible to encourage participants to increase contribution rates, citing longer life expectancies and unexpected costs. About one-third of the firms surveyed for the report feature homepage messaging or promotions encouraging participants to increase rates or stating that increasing rates could lead to more retirement income.
This messaging can be very useful, according to Maresca. T. Rowe Price embeds a forecast on the homepage, as well as an additional forecast based on contributing an extra $100 a month. “It is a different lens for participants to look through,” Maresca says.
Corporate Insight, a New York research firm for financial services, tracks 17 firms that provide retirement services. “Save Your Retirement: Simplifying the Contribution Process for Retirement Savings” is part of Corporate Insight’s Retirement Plan Monitor research service, available by subscription.