21 November 2008
Pension communication - a few approaches
Need for improvements to different employees' understanding of pensions.
This month, BT announced significant changes to its employee pension plan, and end-of-year bonuses are now off the agenda for UBS and Goldman Sachs top officers.
In this special 2-part report, the Hub takes a closer look at the employee pension picture across the UK and US, the different interests in pensions provision across employee age groups, and the implications of the developments for communicators.
Is pension communication an increasing need?
In April 2009, telecoms firm BT plans to introduce several changes to its final salary pension program. These developments follow Royal Mail’s recent example of stopping pension entitlement linked to final salary.
The Hub recently spoke to Stephen Windsor-Lewis, director group people programs, Royal Mail. He's closely involved in Royal Mail’s pension plan adjustments – and was also involved in the changes at BAE Systems in 2004 (see sidebox, left).
Raise awareness
In any organizational change, people need to be aware of the reasons behind it. But different age groups view pension plans differently. “Baby boomers are more used to paternalistic schemes,” Windsor-Lewis says.
“Gen Y, on the other hand, is now becoming more aware. Those employees can’t default to a company pension as people once did.”
Many companies moving to defined contribution (DC) plans are wrestling with the communication challenge. Recognizing the different interests across age groups, Windsor-Lewis says, “There’s a balance to be struck. Don’t over-educate when people are clearly not interested, but provide enough information for those that are.”
Consider audience segmentation
Windsor-Lewis advises communicators to consider audience segmentation for communicating pensions and benefits issues.
The message to a 50-year-old will differ from that to a 20-year-old. ITV, for example, ran a poster campaign about company pension changes to appeal specifically to a young audience.
Awareness usually takes time to build – unless there's "a burning platform". The current credit crunch means an awareness message about pensions could raise awareness within 24 hours, whereas previously it would have taken much longer.
“Communicators would normally run these campaigns slowly over a long period – if they have the time,” says Windsor-Lewis.
Bad news for Gen Y
Windsor-Lewis believes some of the
new DC plans – with the emphasis on members taking responsibility – allow
people to make relatively low entry-level contributions that are unlikely
to provide them with enough pension at retirement.
In the future, this may create a situation where employees are reluctant to retire because their pension won't amount to enough.
A consequently aging workforce could mean employers ultimately re-inherit the problem – no one leaves, so no staff turnover. If the trend for lower contributions continues – which is highly likely in a recession – then employees may not be accumulating enough provision, so the more communicators can do to help them take personal responsibility the better.
It can be difficult to engage people in the pension debate, particularly younger employees who view retirement as a long way off.
Younger employees are hard to engage
Joel Shuler, Strategic Internal Communications Team, Corporate Communications, at financial services firm USAA has experienced significant retirement benefits changes during his career.
He recently spoke to the Hub about transitioning to a defined contribution plan in the US.
Shuler says it can be difficult to engage people in the pension debate, particularly younger employees who view retirement as a long way off – and that any dollars they might receive in the future seem unreal today.
“Pensions are based on the prospect of staying with the same employer and getting incremental raises over the next 20 years. To many in their 20s and 30s it’s hard to imagine being with the same employer that long,” Shuler says.
His previous employer, a public-sector utility, decided to change its benefits provision. But rather than just make the change, the company gave employees a choice about whether to stay with the old pension program or go with a new defined-contribution plan.
Gen Y prefer cash benefits
In Melcrum’s report How to communicate with a global workforce, Steve King, senior advisor at research group Institute for the Future, says IBM created an online environment for employees to experience both sides of the argument.
King reveals that IBM employees went for the cash-benefit option – to the dismay of the company’s baby boomers.
IBM found Gen Y employees, and even Gen X, preferred the change, which went from defined benefits to a cash-balance plan. The former plan heavily favored people who spent their entire career with IBM, whereas a cash-balance plan is better for those who move company.
HR communication often overestimates what employees know about their benefits.
Help employee understanding
Many employees report that they don't really understand how their current benefits work, which creates a big obstacle when communicating pension changes.
Shuler observes that a few years ago most employees didn't need to understand the company’s benefits plan. “You just knew you had a pension,” he says. “But now you really need to understand your benefits plan to maximize it.”
He believes this need to explain benefits can overload company onboarding (or induction) – generally a short time for new employees to take in a lot of policy information. “I often feel the retirement piece is something that goes right over new people’s heads. There’s so much to learn and understand,” Shuler says.
“In the benefits world, I’m reminded daily that HR communication often overestimates what employees know about their benefits. I constantly realize we need to take people further back to help them understand. For benefits administrators it’s even harder because they don’t realize where employees need to start – and the amount of time this takes.”
Have your say
In part 2 of this report, to be published on November 24, we look at the legal jargon associated with pension communication and advise how to communicate pension changes to employees.
Have you been involved in communicating sensitive information – particularly changes to pension plans? What have been the responses from different employee groups to the changes? Do you feel pensions communication will become an increasing challenge for communicators? How prepared do you feel to handle it?
Recommended resources:
Owens Corning employees get the right rewards
A key role for communicators in pensions changes
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