A wait-and-see approach to recent legislative changes sums up Whitbread’s approach on its pension administration
When hotel, coffee shop and restaurant business Whitbread ran focus groups with staff in 2009/10, and before auto-enrolment – it actually asked staff what they wanted from their pension and their pensions communications.
The answer it got was resounding: most staff (many of whom are not pensions-savvy), did not want to be bombarded with too much information. They just wanted what Lesley Williams calls: “simple and straight” advice while for anyone who did want more, just an easy way of being able to access it behind the scenes.
This philosophy has largely stayed the same, and when auto-enrolment did come, it meant only 4% opted out.
All told, even though for most staff, it’s an employee contribution-plus 2%, between a half-two-thirds of employees are in the company pension scheme (97% of which are in the default fund) – with non-members only really comprising those below the necessary earnings threshold because they are part-time.
However, this doesn’t mean it won’t switch off its main focus on increasing the number of people who up their contribution levels. Williams says: “For high earners, such as managers – who are paying 8% with us paying 10% – we’re not hugely worried about replacement rates.
Even for our lower income earners, we believe those contributing will – when they add their pension to the state pension – have a good replacement income. It’s employees in the middle, who are middle-aged, with children and mortgages, that are our focus to see if they can be encouraged to contribute more.”
Research Whitbread is doing now is to identify whether this middle group are comfortable with the amount they’re contributing, or whether it’s because they don’t understand that if they just added a little more, their pots could increase by a lot.
All this is on top of the legislative landscape changing dramatically, but Williams says she won’t be jumping straight into anything too quickly until the full picture is revealed.
She says: “I think it will be a while yet, before we know for certain what we’re able to deliver. What we will be doing first though is changing some of our underlying white-labeled funds and some of the structure of our administration to achieve the new charging rate caps.”
She adds: “We’re also in the middle of a review of our at-retirement options, and what we can provide to staff. [Although it does already suggests employees consider an income draw-down option instead of purchasing an annuity].
She says: “We suspect – because most employees have small pots – that they are likely to want to take their money, but because the whole industry is looking at this, we don’t want to move too quickly yet. We’ll wait and see how things get clarified.”
2013 The year the default fund was last reviewed
99 % The percentage that are in the default fund
45 The average age of membership
This article first appeared in Pensions Insight’s annual research report, DC Pension Plans: An Analysis, in association with J.P. Morgan Asset Management.