How one scheme has used Hymans Robertson’s Guided Outcomes to improve member communications
“We were really concerned that members weren’t saving enough and that they didn’t understand how much it would cost to have a decent income in retirement,” says Anne Harris, UK pensions manager at ScottishPower.
The scheme did analysis of its membership and found that 80% of employees were not on track to have a sufficient income when they retired.
Members are rated as red, amber or gold depending on how likely they are to reach their retirement targets
That’s why Harris decided to use Hymans Robertson’s Guided Outcome tool in the hopes of increasing member engagement and, crucially, the amount employees were putting in.
She explains: “With defined contribution it’s so important for people to put enough in contributions when they’re younger to get the compound interest investment returns.
“So we decided we had to make our employees aware of this situation and shock them into looking at how much they needed to save.”
The new approach has had a significant impact so far with a third of members logging into the portal and one in 10 increasing their contributions as a result.
Harris comments: “A lot of people think that members don’t want to pay more into their pension. But my experience from this and from talking to the members is that it’s not that they don’t want to pay more, they just don’t know how much they should be paying in.”
Scheme type: Contract based (Stakeholder)
Year scheme was set up: 2006
Percentage in the default fund: 97%
Number of funds offered for self-selectors: 59
Scheme last reviewed: 2015
Number of enquiries about new flexibilities since the budget: 50 approximately (the scheme issued a newsletter in Q1 2015 to all members explaining what the new flexibilities would mean for them)
Matching levels: Bronze (3% EE / 6% ER), Silver (4% EE / 8% ER), Gold (5% EE / 10% ER)
Any other benefits: Flexible benefits including holiday purchase, dental plan, private medical insurance, cycle to work, childcare vouchers, all done through salary sacrifice
The portal rates people’s pensions savings as green, amber or red in terms of whether they are on track to get a decent income when they retire.
For those who are getting an amber or red evaluation the portal then tells them what they can do to get to green – either upping contributions or delaying their retirement age.
Members can increase their contributions through the portal
Those who want to increase contributions can do so within the portal. Either by increasing their contributions in one step, or through a staged approach which allows them to increase by 2% each year.
Some employees who have made big jumps – with one employee increasing their annual contributions by 13% in one go”
Most people have opted for the latter, although there have been some employees who have made big jumps – with one employee increasing their annual contributions by 13% in one go.
The staged approach is popular with employees, especially since you can set it up so the increases happen automatically.
“That’s been very popular,” says Harris, “because people will say ‘that’s great, I just want to say yes to this now and I don’t need to think about it.”
Because the ScottishPower scheme has a very generous matching structure, employees can significantly increase their pensions contributions without seriously denting their own pockets.
The system works out an appropriate target income for retirement and the optimal approach needed for members to meet the target. Regular reviews ensure any shortfall is identified early and the contribution, retirement age (dependent on the specific Guided Outcomes (GO) rules for that scheme) is changed, to help keep the member on track.
Employees have a choice of three support options:
- Automatic – “Do it for me”
- Guided – “Help me do it”
- Manual – “Let me do it”
GO can be delivered to members via paper communications or through a fully automated platform. The automated platform enables members to benefit from other features, such as the flexibility to create their own GO savings approach.
The scheme double matches at three stages – 3%, 4% and 5%. So if an employee paying in 3% decides to pay in 2% more their employer contribution will go from 6%-10%. And their total contributions will go from 9% to 15%.
This is the group that Harris is keen to focus on next. She says: “Looking at people who are in the bronze category paying 3% and getting an employer contribution of 6% - a really easy win for them is to go up to 5% and get 10% from employer contributions and it’s just making sure people are aware of that.”
The next step will be for the scheme to do roadshows throughout the sites in the UK where employees sit in a room with either a laptop or iPad and log into their personal portals. People from both the pensions team and Hymans Robertson will be on hand to guide people through the process and answer any questions.
The DC scheme will very soon overtake the closed DB schemes”
Harris is keen to integrate the portal into people’s routines so that they are regularly keeping an eye on their pensions. She says: “We want to get everybody using it and everybody checking their pension situation at least once a year. So it’s really about getting [the message] to members within the workplace.”
“This has been a very big initiative for us, we now have 2,500 people in the DC scheme. The DC scheme will very soon overtake the closed DB schemes.
“The biggest things for me was people were just waiting for people to help them. People really appreciated ScottishPower doing this,” she concludes.