Innovative scheme that takes fear out of planning
It is undoubtedly because of Barclays’ determination and vision to create a highly effective and sustainable new pension arrangement that easily meets the demands of the 21st century that its new structure has picked up the IPE Silver Award for Corporate Pension Fund of 2004. The new pension arrangement includes both defined contribution and defined benefit elements with a guaranteed pension pot. But establishing a new structure of this magnitude that deals with each of the 25,000 potential members as individuals is no mean feat. Barclays implemented the new scheme in conjunction with an intensive and comprehensive communications and education campaign that has seen 95% sign up for the new scheme in one form or another. Perhaps more important, it has helped members to overcome their apathy and reluctance towards pensions and to understand the need to save more.
The need to improve the pensions provision arrangement became apparent after a review of the existing scheme. Barclays found the level of members’ contributions was too low and the recent volatility in the investment markets revealed the vulnerability of defined contribution schemes, making it difficult to plan for retirement.
Barclays believes pensions and benefits are vital in the delivery of two principles of its people policy: equality and diversity, which promotes a content, diverse and safe workforce underpinning the group’s commercial success and as such Barclays seeks to respect and cater for the rights and beliefs of all its employees whilst providing proper support, rewards and training opportunities; money expertise, for which Barclays has adopted a long-term internal strategy to develop people’s awareness and ability to manage their own finances.
Called ‘Afterwork’, a deliberate and shrewd move to remove the word pension from its branding, the new structure incorporates individual credit and top-up investment accounts where the risk and contributions are responsibly shared between Barclays and scheme members, allowing them greater flexibility and control over their personal finances. The credit account includes the cash balance or defined benefit element. 20% of the pensionable salary is added to the value of the account at age 60 and its structure ensures the pension will not depreciate. Moreover, it will be revalued each year to protect against inflation. Members then purchase an annuity at retirement either through Barclays or a third party. The investment account is optional and provides the defined contribution element.
An additional incentive is the two proactive low-cost joining options to resolve the problem that most of the ex-DC members didn’t previously contribute and might feel uncomfortable with the compulsory 3% contribution rate for the credit account. The first is a phased terms option scheme, where members pay nothing to begin with and reduced credits of 14% of pensionable salary are made each month to their credit accounts. Credits are increased each year till they become full members. The second is a reduced terms option, whereby members are not obliged to contribute but receive credits of just 10% of their pensionable salary each year on an indefinite basis.
Barclays used a wide range of internal media to sell the new product. This was particularly necessary as half the potential scheme members are based in branches around the country. The campaign included paper-based media, a dedicated website, a help-line and face-to-face workshops.
The success of the campaign can be measured in the increased take-up and interest it has generated. General awareness about the need to plan effectively for retirement has been heightened with 80% of those surveyed during the campaign feeling they were not saving enough. The helpline received an average 300 calls per day, rising to over 700 in the days just before the deadline for decisions came around. In general, callers said they were wholly satisfied with the service. Some 3,000 attended the workshops and overall, those interviewed believed the Afterwork communications campaign was attractive, thought-provoking and easy to understand.
Statistically, the number of employees opting to make voluntary contributions has risen by 71% and the level of the average contribution rate from 3.5% to 5% of salary. Overall, 95% of the 25,000 have signed up for a credit account completely, with 75% of these also now contributing to their investment account, thus taking full advantage of Barclays’ generous contributions matching arrangements.
This high level of success has ensured Barclays now has a practical, modern and above all innovative pension arrangement in place which fits perfectly in its overall strategy as an employer and helps balance and distribute clearly and fairly the responsibilities of both employer and employee in the employer/employee relationship.