UK - Providing individual employees with the right tools, information and opportunities to take personal responsibility for their retirement savings can be considered a paternalistic approach, according to BT.
Speaking at the NAPF annual conference, Kevin O'Boyle, head of pensions at BT, emphasised the importance of individuals taking responsibility for their retirement, and revealed the improvements it has made to communications for its own DC pension scheme following a review earlier in the year.
He told delegates that in the changes introduced in April the DC moved from a trust-based scheme to a contract based - so that each member essentially has a personal pension - and replaced a trustee board with a governance committee.
As a result, the new committee has set terms of reference of which "70-80% is focused on communications and education to members".
O'Boyle noted that around 18,000 members have been converted into the new DC scheme and it has been made "very difficult to opt out" so the governance committee has a specific focus to "look at the behaviour of employees and how they're investing".
This allows the company to target and identify the behaviour of certain groups of members and offer investment "guidance" if required. For example, O'Boyle said: "If we find a whole load of young members placing their money in cash only this could be a deliberate decision if they think the stock market is going to crash again, or it could be that they don't realise it may not be the best investment over 30-40 years".
Although he stressed that the company and the pension provider would not offer advice, they can ask questions to help members determine their risk profile and "point out other factors that employees need to take into account".
In a question and answer session, he pointed out one of the rationales for moving from a trust to contract-based DC scheme is to highlight the importance of personal responsibility. But he admitted this requires education as many members may not have realised their scheme has changed and it is now an individual pension.
He said: "Companies have to determine where their paternalistic instincts lie. BT wants to get people to take responsibility but that's not going to happen overnight. It is a big step but BT's view is 'let's give people the tools, communication and opportunities and push and push them'."
That said, he stressed it was important for the scheme to have an audit trail, so that if when a member retires the income is less than they expected because they have ignored various reminders and communications then "we can say we did the best we could. Paternalism is to give them the tools to enable them to get the pension they wish".
He added that the investment guidance is not advice, but is "giving support and encouraging people to think about their risk profile and talking through the characteristics of different funds and how the investments work".
O'Boyle said it is giving members "much more information about performance, strategy and how the funds invest and what they invest in". But he admitted the pension provider, "who is on the hook if the guidance goes too far, is cautious about what they say. It's early days, but experience so far is that people have found it helpful".
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