Molson Coors’ pensions manager on auto-enrolment, the new pensions flexibilities - and auto-escalation
‘There’s a beer’, according to the latest TV ad by Britain’s Beer Alliance, ‘for every occasion’. At Molson Coors (the company formed by the merger of Molson of Canada and Coors of the United States in 2005), its success has been providing just that.
Whether it’s Cobra for Indian takeaways, Staropramen (a Czech lager) for city bars, Carling to go with BBQs or footie in front of the TV, or Doom Bar for the nation’s real ale aficionados, the world’s seventh largest brewer has a beer for just about everyone.
In 2014, worldwide sales were $5,927.5 million. That sort of revenue allowed it to operate a defined benefit pension scheme (which closed only in 2009).
“The change was very much about giving staff the best default fund we could”
Even when the DB scheme was replaced, initially by a Group Personal Pension with Prudential, it offered staff extremely generous matched contribution levels. For every percent of salary employees contributed (starting at 3%) Molson Coors matched it up to 8% - meaning those who hit this latter level realised a 16% contribution.
“We’ve long been proud of our matched contribution levels,” says Oliver Polson, Molson Coors’ pensions manager for UK & Ireland.
Today, Polson has an impressive 21.1% of members contributing 8% or above and a further 30% contributing 4-7%.
In fact, he chuckles, “when we reviewed our scheme in 2012, in advance of auto-enrolment – and decided to change it to Friends Life for more fit-for-purpose and robust investment solutions – the contribution levels were that good, they were the only thing that didn’t change!”
The move to Friends Life’s ‘My Money’ platform (from July 2013) was the result of a root and branch review of its 1,950-strong pension plan, which has assets of more than £50million, and which sees around £10million added to it every year.
“The change was very much about giving staff the best default fund we could; but also giving those who wanted to make their own decisions better choice too,” says Polson.
“The default fund – in its growth phase – is a blended fund of three passively managed underlying funds – global, UK and diversified growth funds – which are then actively managed when the outlook is deemed less good. This sees us moving in or out of equities more.”
He adds: “For those who want to make their own decisions, we now have three default risk bundled funds – called simply high risk, low risk and very low risk. About 90% of members are in what we’d call the pure default, with the rest opting to make their own decisions, but ultimately, our main communication drive has been to say that the pure default works.”
Friends Life was the provider of choice not just because of the funds it offered, but also because of the options it gave staff to see their pension pot, model how different contributions might pan out, and also set target pension pot sizes and how contributions will need to change.
“It also features web-casts staff can watch [including taking staff through their annual pension statement line by line – introduced after people said they didn’t understand it], as well as other sources of information,” Polson says.
He is understandably proud of the strides this platform is already making. When the new pension was being introduced, staff couldn’t just automatically be transferred – they needed to be consulted – and 85% agreed to move over. “This is unheard of,” he says.
Today only 40 staff are outside the pension scheme, and Polson attributes much of the success to the simplicity and transparency he was able to offer members.
But it’s also the way the online platform is playing a key part in Molson Coors’ pensions communications strategy that is really driving change.
“The new plan also saw the introduction of a five-point strategy that we will continually base all of our communications around,” says Polson.
“These are: maximising the website; understanding the benefit of increasing contributions; understanding the benefits statement; increasing awareness of new flexibilities [post-2015/15 Budgets] and increasing people’s understanding of the scheme.”
Most of these elements have specific metrics attached that Polson wants to hit. For example, for website use, the ambition is to have 25% of staff view their personalised portal at least once a year. So far, it’s a level that has been achieved.
“We talk to staff about setting pension pot targets, but we don’t dictate what these should be”
On understanding the scheme, Polson says he wants at least 10% of staff to complete an annual survey asking them what they think could be improved – and again, this has so far been hit.
But it’s increasing contribution levels where he really wants to make the biggest impact. “Yes, we had great employer-matching, but under the Prudential scheme, we never really made as big a thing of it as we could,” he admits. “The modeling tools now enable us to do this, and we have specific campaign encouraging use of them, including our key one – our ‘1% More’ campaign.”
As the name suggests, the ambition is for staff not contributing the 8% maximum to try and contribute just 1% more (and to be persuaded so by seeing what difference it could make to their pot by the time they retire).
Polson wants 10% of those not at the top level to increase their contributions each year. “We’re only one year in, but so far we have achieved this too,” he says, triumphantly.
Type of scheme: Contract
Year it was set up: 2013
Number of members: 1,950
Percentage investing in the default fund: 96%
Matched contribution: Yes, from 3% up to 8%
Changes to default fund since the 2014 Budget: Changed to target date fund.
In fact since 2013 – the point where the five-point strategy has been embedded into everything Molson Coors does – the percentage of employees contributing 3% has improved from 33.4% to 46.5%. Those paying in 4-7% have moved from 25.5% to 30.4%, while those at 8% or more are up from 17.4%.
Says Polson: “We talk to staff about setting pension pot targets, but what we’re keen to ensure is that we don’t dictate what these should be. Everyone’s financial needs will be different. The main aim is simply to sell the virtue of giving a bit more.”
To help improve these figures further, one innovation Polson is currently looking at is automatic escalations. He says: “We’re investigating how we can do this direct from payroll, so people automatically increase their pension contributions in line with pay rises they receive.”
All of these recent improvements were made to smooth the introduction of one change Polson and his colleagues knew about: auto-enrolment. Predicted by no one however, were the new pensions freedoms announced in the 2014 Budget. But Polson says the communications strategy is there exactly to deal with future changes that may arise.
He says: “So far, around 50% of members who have retired since the changes came in have opted to purchase an annuity, which is more than what we’re seeing emerge nationally.
“We don’t feel it’s for us to be selecting advisers for members”
He adds: “We believe this is due to our staff being slightly more risk averse – they told us so in our surveys. Most people ‘get’ the tax issue around cashing their money in, and I think that’s turned a lot of people off from it.
“What we will be doing though is adding a drawdown facility later in the autumn. In the long-term, we think this will be the option members prefer, because they can still buy an annuity at some point later in the future.”
One service staff don’t get is access to financial advisers. What they can have is annuity broking advice, through The Open Market Annuity Service (TOMAS). “We don’t feel it’s for us to be selecting advisers for members,” says Polson.
That said, what he is looking into is bolting on a retirement web portal to the current offering. “One provider we’re assessing right now gives members the option of picking advisers of their choice,” he confirms.
It’s clear Polson puts significant thought into everything he does. Even quarterly reviews with the advisory board are planned so they deliver maximum efficiency.
“Rather than try and discuss a little of everything, we instead focus on a key aim in detail each time – be it investments, governance/compliance or administration,” he explains. Then, at the end of the year, he does what he calls a ‘strategic deep dive’.
As well as contributions successes, Polson says there are other metrics he looks at too. He says he’s particularly pleased to have maintained an Annual Management Charge of 0.46% for the default fund – good value, he argues, given the level of sophistication of the tools available to staff.
As for the future, he’s content to wait and see how the market responds to the new flexibilities. “We certainly haven’t wanted to rush in. We want to wait until the market settles down a bit,” he says. It’s an entirely prudent response - and a strategy that surely deserves a toast.