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How to manage pensions scheme change

12th September 2017

First appeared on the HR Director on 24/08/17

The feature will also look at why pensions change could also be the catalyst for improving the financial education of employees. You can say what you like about change, but the truth is that most people are uncomfortable with it. Change is almost always viewed with suspicion – an assured assumption that any change will have a detrimental impact on those affected. Who ever heard of a change for the better? The other, related truth is that change is always tricky to implement. With multiple stakeholders, fast moving deadlines, legal requirements and often limited resources, pensions change represents a huge challenge for those who are tasked with delivery.

What’s more, pensions change over the past decade has been something of a ‘revolving door’. The first changes were within the world of DB – increased contributions and decreasing accruals in final salary schemes, and then the move to career average or CARE arrangements. Some organisations introduced defined ambition – cash balance or retirement balance. More latterly the change has been to DC for the future, spurred on by the combined effect of increased longevity, the introduction of auto-enrolment, pensions freedoms and the removal of contracting-out. It’s not unusual for organisations to have delivered four or more pension change exercises in the past decade. For the average employee this is confusing at best, and at its worst completely disengages them from the intended motivation of good corporate pension provision.

So how can HR Directors ensure that scheme change is communicated well, and how can they maximise the opportunity to engage and motivate employees post-changes?

Firstly, there needs to be a strategic approach to pension change communication. It’s essential to be clear about objectives, carefully consider the messages, and at the same time identify, engage and manage the key stakeholders. We would generally recommend a phased approach to communicating change with a strategy in place for each phase – typically pre-launch, consultation and post-consultation. Project ownership and responsibility is important. These are company projects, and whilst in the past, leadership and responsibility was often vested in the FD, these projects increasingly fall into the responsibility of the HRD. Need help? As someone who has been involved in the delivery of approaching fifty such projects over the past decade, my seven tips for successful delivery of a pension change consultation are:

Think about the legal implications of what you are communicating. The IBM vs Dalgleish judgement considered, for the first time, the understanding a member might take from the way information is presented. This means that pension change processes need to carefully consider not only the detail of member communications (both past and those under consideration), but also the overall impression they give and to member expectations which could be created by those communications.

Think carefully about the timing of the consultation. This may be stating the obvious, but there are times within a business cycle which should be avoided. Other corporate messages and mass communications going out at the same time need to be considered for possible conflicting messaging. One recent example I came across was an organisation communicating pension change at the same time as they were announcing a record profit. Sometimes such clashes are unavoidable, but in this case the feedback was easy to predict. Changes can be disruptive to the business, but at the same time you want people to engage, so be sensitive to that. Holding a 60-day consultation over July/August when many employees may be on annual leave isn’t advisable, nor is a Christmas deadline for a retail organisation.

Think about the feedback. You will need to have a strategy from the outset about how you manage feedback and you will need to set employees’ expectations, for example, that they won’t receive an individual response, if indeed that is the approach you wish to take. You also need to think about how you will report feedback into the relevant forums (e.g. Board meetings), what you can usefully report, and develop your recording mechanisms accordingly. For example, “all those giving feedback were unhappy about the changes” isn’t useful (or surprising) reporting, but, “although most were unhappy, 55 percent understood why the company was making these changes and 67 percent said that they fully or mostly understood what it meant to them” is. You also need to be conscious that as this is a consultation, things can move, and when they do, this will create a dialogue opportunity. If the change is contentious you will need an effective strategy to manage the grapevine.

Think about the messages and the channels. Your message and those who deliver it have to be credible to your audience. It is important to develop the strength of the case for change and credible evidence to back this up. It seems obvious to say that you should use appropriate tools and channels for your audience, but this needs careful consideration. You need to be aware of normal, formal, and also informal channels in your organisation and make sure you use them. For example, if social media is widely used already within the organisation, either you provide (and exercise control over) a channel for this, or someone else undoubtedly will!

Engage and manage your key stakeholders. Engaging unions is often an obvious one, but getting the right level of involvement from line managers and field-based HR managers is also important. Providing them with regular information and giving them clear guidance on what to say, where to direct employees for further information, and also when to say nothing is vital to the success of the exercise.

Think about the process of consultation. Ensure that during the consultation process you have considered how to continue to engage with employees with regular updates. This ensures that voids aren’t created. If they are created, you can be sure that someone else will fill them!

Remember the member. Lastly, but probably most importantly, remember the personal impact of the pension change. The ‘what does it mean for me and my retirement?’ is the most important point for employees, so make sure you answer it! Providing individual illustrations or facilitating modelling with their personal data allows members to plan and helps facilitate acceptance of the change.

Finally, don’t forget that change presents a good opportunity to encourage your employees to engage with their benefits. The value of something is never as great as when it is likely to be taken away, and given the general move to DC, there is an increasing requirement for companies to deliver financial education to employees. This provides an opportunity to engage with employees in a way you have never done before – addressing their level of debt, for example. There is a great deal of evidence that promoting wellness (including financial wellness) helps to increase productivity and engagement, so make the most of this opportunity!


Karen Partridge
Head of Client Services – UK & Australia

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