IPE asked pension funds in Austria, the CzechRepublic and the Netherlands: ‘How are you communicating with your members?’
Petr Benes, CEO and chairman at CSOB Pension Fund Stabilita in the Czech Republic, a third pillar pension fund, which has invested assets of CZK22bn (€926m)
In these turbulent times our pension fund members are interested in what is happening on the financial markets and what impact the events have had on the fund. As a result, we need to be able to provide answers to these questions.
We communicate with our members through three different channels. The first is direct mail. We are legally obliged to send out a statement by mail to all our members at least once a year to inform them about the annual return of their portfolio and the amount of money we have in our fund following the profit distribution.
But in the Czech Republic while we have a first pillar PAYG system as yet we have no second pillar funds. Consequently, the voluntary third pillar funds like us are the only private supplementary option and as a result competition for members is intense. More members means a higher volume of money and a higher likelihood of achieving greater returns.
And that is why - although the only legal requirement is to communicate via mail - most Czech pension funds also employ additional channels on a voluntary basis in order to provide the financial information and other benefits to their members.
So in addition we have a website on which our members can find information and answers to the most frequently asked questions. And on top of that we also run a call centre where clients call and ask for information. We have been operating these communication methods since 2000 and maintained them through the 2006 acquisitions of the Zemsky Pension Fund and the Hornicky PF Ostrava, which were both successfully merged with CSOB PF Progres.
We have seen an increase in queries as a result of the market turmoil but not to a dramatic extent. Nevertheless, we have increased the staff in our call centre to deal with the extra information required. But this is not a big issue now.
But we anticipate that proposed legislation will raise further questions about the system and so will require the deployment of further resources to communication.
As part of a pension reform of the state pension system that will see a gradual increase of retirement age to 65, the government is expected to table a bill in January on private pension schemes. This will oblige pension fund providers to open new parallel legal entities called pension companies that in two to three years will manage several funds, and so offer members the choice of different levels of risk. A conservative option will correspond to the current approach, which carries a guarantee, while other choices will riskier but offer the chance of a higher return.
Obviously communication has a cost. While running the website is relatively cheap, sending out direct mail is the most expensive communication channel we have. However, we think communication helps us to stabilise our member database, as people tend to react to developments reported by the media and we then have to react to such reports in good time in order to avoid an excessive number of terminated contracts.
Michaela Attermeyer, head of asset management at VBV Pensionskasse in Austria, which had invested assets of €4.4bn at the end of 2007
We consider that communication is part of our business strategy and therefore it has its own budget allocation. We owe it to our members to communicate with them but it is also in our own interest to do that.
We are Austria’s biggest Pensionskasse and we want to establish Pensionskassen as the real provider of pensions, because there are other alternatives in the market offering occupational pensions, such as the corporate group insurance, betriebliche Kollektivversicherung. However, we believe that Pensionskassen are a lot more transparent than insurers and communication plays an important role in this.
Communication is also particularly important to us because we communicate with different groups such as employers, individual active employees and pensioners.
The Austrian pensions regulator requires Pensionskassen to meet certain minimum standards with regard to communication, such as informing members about their investments, contributions and benefits, taxation and risks. Of course we adhere to these minimum standards but in addition we go beyond that.
We, for example, provide members with a monthly internet report, with every member being provided with their own personal login to our home page in order to view their personal investments and asset allocation. In this, we also report about what is going on in the financial markets.
We are particularly zealous about our communication in turbulent times such as now, when there is much bewilderment about the system, and send additional information to our members, particularly our investment committee members, via e-mail to reassure them.
We try to use e-mail and the internet as much as possible because they are fast and low-cost methods of communication. However, the downside of the internet is that the individual member needs to actively look up the information. That is why we do not rely on just one communication method but use a combination of channels to reach our members.
We also communicate with our members in writing. For instance, we send out our annual statement by post because it is a document members tend to want to keep.
While I am not sure whether queries in general have increased we have noticed that the type of enquiries has changed. They used to be mainly of an administrative nature but in the light of the current market crisis we have answered an increasing number of questions about the security of members’ pensions.
Margot Zuidervliet, communications officer at Pensioenfonds Horeca en Catering (PH&C) in the Netherlands, which has invested assets of €2.5bn
Because we take care of their money we consider it our duty to communicate with our members. In fact, clear and precise communication and viewing things from our clients’ perspective are part of our core values and so communication with our target groups - the employees of the Dutch hospitality and catering industry - is the spearhead of our policy for the years ahead.
Almost everyone thinks that their pension is important but they know very little about it and take no effort to inform themselves, which makes communication with them difficult. The solution is not to provide them with even more information but to contact them at times in their lives when they are more open to it, for example when they are getting married or divorced, when they have children or when they are approaching retirement.
Our members want to know what is in it for them regarding pensions. Most of the information is on our website, or they can call our customer service staff. Dutch regulations also require that we send new members information about our fund in writing.
We are also obliged to send them an overview of their pension every year. And from 2009 we will have to communicate our indexation policy to our members. We are required by the Netherlands Authority for the Financial Markets to do this via an indexation label that will indicate the expected level of indexation, as well as indexation in a bad scenario. We have to send this label out on 14 prescribed occasions over the life of a pensions policy.
It is often a struggle to adhere to the regulations and at the same time be cost effective. Almost all people working in restaurants, bars, hotels and the catering sector have a very small level of pension. Consequently, we always try to spend as little money as possible on communication. We do this by communicating mainly via cheaper methods such as internet, email and the hotline instead of by writing.
Another issue of particular importance for us as a pension fund is that many of our members are young people working in bars or restaurants as a job on the side for a few months. We have to inform them about their pensions but it is questionable whether they are they really interested if they will only work in the industry for a very short time. And in such circumstances how does their pension relate to the costs of communication when every stamp used for posting information to them forms a substantial part of the pension they build up in the few months they are working?
The relatively young age of our members also means the credit crisis affects us differently. While we have a question and answer section providing information relating to it on our website, our members are not really interested in the financial crisis.
Interviews conducted by Nina Röhrbein