Swords, once a village north of Dublin Airport, is set to become a community of 50,000-plus thanks to companies like DHL International, one of the many international service companies that have bases in Ireland. It now employs 500 in Ireland. A decade ago this was around 100.
“Originally we were a branch of the UK operations and virtually everything that was done there was mirrored over here,” says DHL financial controller Alan Smith, who moved to Dublin nine years ago. This included the pension scheme, which though it had local managers was administered from the UK.
The decision to cut the pensions link with Britain was done in the early 1990s with the help of Irish Pensions Trust (IPT), which act as corporate trustees to the scheme while Mercer are the adviser. Like the UK plan, the Irish-administered one was DC, and followed the practice of making a ‘deducter’ of a flat amount of Ir£9,000 when calculating the salary for contributions, which are 9% for the employer and 2.5% for employees.
“We changed manager at the time to the then Ulster Bank Investment Management, now KBC, on the basis that they were then a solid performer, which was likely to improve.” The plan had two fund options at that stage, managed and cash, and an additional voluntary contributions plan, enabling members to make extra tax advantaged pensions contributions, with the same fund choices.
After a number of years, the plan decided to add to the fund options by including a guaranteed fund from Irish Life, that provided a guaranteed return on a year by year basis which, in risk and return terms, lay between the cash and managed funds.
“Our reasoning for this was that there was a relatively high proportion of funds going into the cash fund. We found it difficult to comprehend this as we have a fairly young workforce.” Though if anyone asked which fund they should use, Smith says the advantages of the managed fund were pointed out, but he thinks the fears Robert Maxwell raised still overshadowed members’ thinking.
“We hoped this halfway house would help, even though it was not regarded as a replacement for the managed fund.” But not many took up the new option. Again DHL undertook a series of pension briefings for staff to make them aware of what was on offer, which did not have much of an impact. “We also ran personalised one to one meetings between employees and IPT people, which did have an impact but more on the AVC side than the main plan.”
Smith says that while company perspective is not directly affected if the employees choose cash instead of the managed fund, “there is a concern from a trustees’ point of view that members might come back and say that they put contributions into cash and the trustees never told them of the consequences”.
DHL decided to revisit the fund choice issue again and introduced a further fund option from the beginning of this year, following what its sister company was doing in the UK. “We have brought in a pure equity fund.” As part of the launch, the company held another set of briefings. “These were to bring members up to date on pensions issues generally, and to discuss the options, including the new fund.” Again individual one-to-one meetings with IPT experts will enable members to bring up their own concerns, he says.
The greatest interest has generally been among members in their 30s who have been with the group for a number of years, according to Smith.
One change from the increased choice was to limit switching to once a year, instead of when they wanted as members could previously. “But we don’t see this change will stop people making a move if they want to.” Currently about 85% are in the managed fund and 15% in cash. So far the fund has built up over Ir£2m in assets. The scheme has an age restriction of 26 for entry and covers one third or so of the workforce, as most of the staff would be under this age.
When people leave DHL, the policy is to persuade them to transfer their pension assets to their new employer’s scheme, if there is one, otherwise, they are encouraged to take out a pension bond and transfer the assets there. He says:“This is because of the problems we had when setting up the Irish scheme administration of tracking down departed employees who had left their benefits with us. We had great difficulty in finding the whereabouts of 30–40 people – that took a long time, so we want to avoid being in this situation again.”
Also, he adds the corporate pension trustees charge per member in the scheme, whether they are sleepers or not. “So this approach really makes sense.”
Smith hopes that attitudes are changing in the workplace, as people are more aware that they can no longer rely just on the state and must become more involved in the choices governing their pensions.