Talking with members
Carole Ward, administration partner at consultancy Barnett Waddingham, says communication is becoming increasingly important as more companies change the structure of pension arrangements.
"It may be a big change such as closing their final salary scheme
and replacing it with a money
purchase scheme, or the change may be more subtle, such as reducing the rate of accrual for future service," she says.
But whatever the changes, employees need to understand them. A reduction in the accrual rate might be accompanied by an increase in the members' contribution, she says.
"Whilst members may see this as having a benefit taken away from them, good communication will ensure they understand the reason for the decision and, perhaps, any less favourable alternatives," says Ward. "This will make the change more palatable."
When a pension scheme changes to a money purchase arrangement, employees need to understand the risks and the fact that the uncertainty falls on them, she says.
"They also need to understand the decisions that they need to make and the impact of these decisions on their pension benefits at retirement," she says. The main decisions - how much they will contribute, and how the contributions are invested - need not be very complex, but they do need to be explained clearly, Ward adds.
Ward says there is no right or wrong way for companies to approach their communication project. "It depends on the nature of the workforce and the company's preferred style of communication."
Mostly, there will be a combination of written communication - either paper or electronic - and face-to-face communication through group presentations or one-to-one discussions, she says, adding that some companies also give employees access to independent financial advice.
Having a website dedicated to their pension scheme is becoming the norm for more and more companies. The degree of sophistication ranges from providing access to basic scheme documentation online - for example, the scheme booklet - to allowing members to view or amend a their records or to obtain illustrations of benefits. Systems for money purchase benefits may also provide facilities to switch funds and detailed fund information, Ward says.
Pension schemes that do not take communication seriously, will end up waving goodbye to members, according to Claus Skadhauge, head of communications at Danish industry-wide pensions provider PKA. The provider won the 2005 IPE Award for member services and communications.
The subject of pensions is already a very difficult one for most people, says Skadhauge, and on top of this, schemes tend to add options, leaving members with more and more decisions to make regarding their pensions, he says.
"So PKA's foremost objective is to offer members sufficient information at the right time in a way they prefer," he says.
"Then they can make their decision on basis of knowledge. If we don't do that, members may become indifferent and careless with no real idea of the consequences.
"Openness, transparency and dialogue should be key issues to every
pension fund," Skadhauge says. It is wrong that mandatory pension funds do not bother to communicate with members, he says.
"The Danish pension funds I know of see it as a special obligation to create dialogue with the members, since they have nowhere else to go," he adds.
The web is the most important issue to deal with when planning communication, according to Skadhauge.
"It's always there, and everything is possible. What you have to plan for is how you'll use it," he says. "When systems have been established, it is a much cheaper, faster and more flexible way to deal with communications," he says.
But since the web does not reach everyone, PKA will still send out thousands of letters for many years yet. "We will still have to produce brochures, and definitely nothing compares with face-to-face communication," Skadhauge says. "At PKA we have a comprehensive meeting programme which has been established for many years. We also publish a quarterly members' magazine," he explains.