Jack Jones talks to Ruston Smith about the Tesco pension team’s exceptionally busy year

The Tesco pensions team was the biggest winner on the day of the Engaged Investor  Trustee Awards scooping three wins  and a commendation. Tesco’s DC arrangements were recognised as it picked up prizes for best approach to DC and best communication strategy.


In the best governance category the DC scheme was highly commended while Tesco’s DB scheme got the top prize. Not bad considering the DC scheme has been in existence for less than a year.


So what makes the DC scheme stand out? When putting the proposition together, the pensions department spent a lot of time talking, and listening, to colleagues.

“We analysed colleague data and listened to their priorities,” says pension director Ruston Smith. “We used feedback-loops to help us shape our approach and react quickly through communications over the project.”

This article was taken from our special digital edition celebrating the winners of the Engaged Investor  Trustee Awards. To read more case studies from award-winning schemes click here.

The overall message from staff was that they wanted a contribution structure that was simple, flexible and affordable and generated good outcomes.

As a result the firm opted for Legal & General’s mastertrust. The judges were impressed by the rigorous governance arrangements it put in place, the well thought out investment offerings and low charges of just 0.28%.

The outsourced scheme has a double layer of governance, with an in-house committee complementing the work of the trustees of the L&G mastertrust. Smith says the aim was to make the DC committee at least as robust as a best in class own trust.

“Because we’re managing members’ personal savings, it is very important to make sure you’ve got very good oversight,” he explains. “That means the right people, thinking about the right things at the right time.

“We chose a mastertrust because you have one layer of oversight and strong governance with independent trustees overseeing it, and also, we have a very robust layer of governance through our DC committee.”


The governance committee has a strong focus on the experience of individual members. It monitors asset class performance and total returns across its different strategies, but it also follows the journey of a sample of members.

Smith says: “We track the journey, which is a bit like monitoring the funding level in DB and making sure the investment performance is within the risk budget and risk parameters.”

The governance committee also keeps a close eye on the scheme helpline. “We want to understand what members are saying, and what questions they’re asking,” says Smith. “And by having this lens over the actual journey of members’ savings compared to targets, we’re really set up to respond and communicate with them if we feel it is appropriate.”

Before launching the scheme, the pension team also put a lot of work into its investment strategy. They worked with Hymans  Robertson to come up with a bespoke default fund that uses three age-related glide paths with cash, annuity and drawdown pre-retirement phases.

These default strategies are built around optimising members’ outcomes, net of fees, at an appropriate level of risk over their working life, and are accompanied by a range of self-select funds. Smith says the DC committee reviews the default regularly to make sure it remains appropriate.


Launching the scheme required a huge communication project, and Tesco took advantage of this to open a regular dialogue with scheme members. This is no easy task with a diverse workforce of 300,000 people, over 2,600 sites, most of them without access to computers at work.

But the judges were impressed by the way the firm went about this task, describing Tesco’s entry as “a wow submission, with really impressive results”.

The numbers alone are eye-catching. Some 1.6m emails were sent out, 150,000 helpline calls were taken, thousands of face-to-face conversations were had, and almost 500 members got involved on Yammer, a work social media platform.

On top of this, more than 110,000 people signed up the newly launched TheColleagueRoom.com, a platform set up to give access to retirement services.


Smith is keen to capitalise on this engagement. He explains: “The way we approach our communications strategy is that we think about the three or four things we want colleagues to know over a year, and we develop a communication strategy that is as simple and accessible as it can possibly be, to land those messages over the year.”

The scheme found that short videos of question and answer sessions were particularly helpful. These exercises have included a session with Pensions Advisory Service chief executive Michelle Cracknell, which gave workers from different sections of the business the chance to quiz her on the impact of changes to the state pension.

The scheme also gives members access to TPAS through a white labelled helpline (alongside Tesco and L&G helplines).

Another impressive element of the strategy is that it is constantly being developed. “We have feedback loops to understand when a particular campaign has gone well, what the learnings are, what we can do better next time, and the extent to which people understood what we were actually saying,” says Smith.

“For our colleagues, hopefully it is a continuous long conversation where we can help them to understand pensions better and know when to ask what questions to ask at the right time.”


This combination of thoughtful scheme design and powerful engagement strategy has achieved some impressive results. More than 220,000 workers joined the new scheme, including almost 20,000 who had previously opted out. Opt-out levels of 3.5% were well below the industry average.

The scheme also beat the ambitious targets it had set for raising contributions. In the first few months, 14.5% of members decided to increase the amount they paid in, with 20,000 taking advantage of the maximum 7.5% matching contribution.

The high number of people signing up for TheColleagueRoom.com also means that two in five members are now actively managing their pension savings.

So what lessons does Smith think others can learn from Tesco’s success? “The key messages I’ve taken away are understand your colleagues, listen to the feedback you get, then keep it really simple and remove the jargon,” he says. “Interestingly, one of the things that we learned by talking to our colleagues is that people have very little time, so you have to be short and simple.”

So all in all it’s been a busy, but highly rewarding year for the Tesco pension team. Smith is delighted with the haul of trophies taken away from the Engaged Investor Trustee Awards, and hopes it will encourage colleagues to save even more. 

“Awards are important because the right awards help to give our members confidence that the scheme they’re saving in is well run, he says.

“That hopefully gives them the belief it is the right place to save and, if they can afford it, to save more for their future.”