Transforming DC Pension Engagement: Lessons from Australia for the UK Market  

Gone are the days when pension communication was a passive affair, with members left to their own devices to seek out information, or not. As both technological advances and market dynamics push providers towards more active, personalised approaches to engagement, it’s clear that those who do not adapt will be left behind. 

Australia’s defined contribution (DC) pension system, with an extra two decades of maturity compared to the UK’s, offers valuable lessons in keeping member outcomes front-of-mind while transforming engagement. Dominated by large superannuation funds that actively engage with individuals, Australia’s DC sector has shifted from an employer-led approach to a direct-to-consumer model.

While parts of the UK market are still catching up, some providers – particularly those with experience in both regions – are ahead of the curve. The challenge for their competitors will be to embrace personalised engagement and adapt quickly, or risk being outpaced by providers who keep member outcomes at the fore.

Auto-enrolment has successfully brought millions of UK workers into pensions, but it has also created an engagement gap, with half (51%)¹ of adult DC savers showing low or very low engagement.

Though auto-enrolment is a step forward compared to the old days of staggering pension inadequacy, it’s not the final stage in the UK’s pension evolution. Enhancing engagement is one crucial way to improve member outcomes, enabling savers to make active choices that suit their needs. By proactively guiding members according to their circumstances, providers have a chance to close the engagement gap and improve savers’ likelihood of a comfortable retirement. 

“By engaging members, Australian superannuation funds have been able to better understand their members and focus their efforts toward areas that will be valued,” says Richard Dunn, Principal at Mercer Australia. 

“For instance, many funds are looking to review their investment menus with a focus on challenging whether their range of investment options are engaging members and delivering strong investment outcomes. In cases where an option is not popular enough to attract the asset base require to operate at scale, its role on the menu is being questioned.”

One of the most anticipated shifts in pension communication is the move from a business-to-business (B2B) approach to a business-to-consumer (B2C) one.

In Australia, this shift is well established, with superannuation funds now the face of the industry as they engage directly with members via mobile apps, social media and more.  

In the UK, too, there is a growing recognition of the need for more direct communication with members – particularly as master trusts become more central to the market and challenge the traditional employer-led structure of DC. 

“The rise of master trusts has helped move the conversation from employer-led to member-focused,” says Tom Higham, Head of Engagement at Mercer UK.

“Employers are increasingly outsourcing their pension provisions, handing over the keys to master trust providers like Mercer to manage the member relationship directly.” 

Charlotte McAusland, Director, DC Consulting at Mercer UK, adds: “Even in employer-run schemes, there's still a strong desire for personal engagement. Employers believe they know their employees best and want to maintain that connection. But these schemes might lack the advanced tools that larger master trusts have, which could impact the level of personalised engagement.”

Effective engagement hinges on personalisation. Moving beyond broad personas, the goal is to create an individualised experience where each member receives guidance that is directly relevant to their unique circumstances. However, “progress on personalisation does not have to come in leaps and bounds” adds Dunn. “Small, meaningful steps towards personalisation, such as improving the granularity of personas and linking personas to the services members receive, can demonstrably improve member outcomes”. 

Technological advancements, including artificial intelligence (AI) and big data, drive this shift. In Australia, superannuation funds have been quick to adopt digital tools, setting the stage for their UK counterparts. But despite these advancements, stakeholders say² engagement levels in Australia remain low, particularly among those with lower balances³ or who don’t receive professional financial advice⁴. 

This presents an opportunity for UK providers to learn from Australia’s experience and take the lead. By focusing on more targeted engagement strategies that resonate across all member segments, UK funds can position themselves as innovators, setting new standards for effective member communication.

Higham says: "We are moving towards a model where every communication is tailored to the individual. By combining demographic and behavioural data, we can create a much richer portrait of each member, allowing us to engage with them on a personal level."

Personalised engagement isn’t a set-and-forget process. The best DC providers are attuned to the latest technologies, exploring how they enhance member engagement and outcomes. Mercer, for instance, is developing an AI conversational agent that enables truly individual interactions on platforms members use most.

"The agent will not only provide answers based on data but will also bridge gaps in terms of vulnerability, financial literacy, accessibility and language. It will talk to people on their terms about the things they care about,” says Higham. “We’re also exploring SMS, WhatsApp and other messaging platforms to meet members where they are. By integrating AI into these channels, we can create a seamless, personalised experience that fits into members' everyday lives.” 

The shift towards personalised engagement is more than a trend – it’s the future of pension communication. Providers who embrace these advancements will not only lead the market but will also hold the potential for improved member outcomes. The lessons from Australia’s more mature market offer valuable insights, but the key to success in the UK will be the ability of providers to adapt and innovate.

Footnotes

1. https://www.fca.org.uk/publication/financial-lives/fls-2022-pensions.pdf

2. https://ministers.treasury.gov.au/ministers/stephen-jones-2022/articles/opinion-piece-super-funds-must-step-mark-member-engagement

3. https://investmenttrends.com/resource/2024-super-member-engagement-report/

4. https://www.superreview.com.au/news/financial-advice/advised-australians-super-funds-benefit-enhanced-engagement