Consumer products group Henkel takes a behavioural approach to encouraging employees to save more towards their retirement.
The company, which manufactures and markets brands such as Schwarzkopf and Pritt Stick glue, gives staff a prod in the right direction by automatically enrolling them in its defined contribution scheme.
Paul Ryan, HR operations manager, explains: “You have to take positive action not to be a member [of the pension scheme]. It avoids any apathy or indecision about what is often a complex matter.” Back in 1992, when the onus was on employees to opt in rather than opt out, just 70% staff were members. Now 90% of Henkel’s 1,300 UK staff have joined the scheme.
“We introduced a waiver form where the employees had to sign away their prospective benefits if they did not want to join or remain as members. We encouraged them to take independent financial advice and left a space on the form for their partners to sign, as they are potential beneficiaries,” says Ryan.
He adds that the employer can work around employee procrastination. “Contribution levels, investment options and retirement age choices can all have defaults to avoid unintended consequences of inaction on behalf of the employee.
“The complexity can cause employees to defer decisions simply because they haven’t got round to understanding and deciding what to do. For example, using a default lifestyling matrix for investment avoids someone staying in equities right up to their retirement date unless they specifically choose to do so.”