While improving a defined contribution pension plan may appear to be simple, ensuring employees fully understand the changes is a crucial part of the exercise, said Ian Baines, head of pensions at Britain’s Nationwide Building Society.
Baines told the story of his company’s pension changes at Benefits Canada‘s 2018 Defined Contribution Plan Summit in February. Nationwide, Britain’s second-largest mortgage provider, has 18,500 employees, 12,500 of whom are in a defined contribution plan. Improvements introduced in 2015 included boosting the core employer contribution to 13 per cent of salary from nine per cent and adjusting the vesting rules.
Nationwide phased in the changes by incorporating a variety of behavioural nudges into a three-phase engagement process. The process started with an education and awareness phase, which then meshed into introductory and implementation components.
Employee interest was strong, said Baines. The proportion of defined contribution plan members who contributed more than the four per cent minimum rose to 90 per cent. Additional voluntary contributions also increased, as did employee engagement, as measured by website visits and participation in education seminars.
The changes the company made were, of course, very generous. However, good communications played a key role in encouraging acceptance. According to Baines, they included highlighting the theme of “pay more to get more” and inserting emotional triggers into a humorous video that explained the plan changes. Support from particular groups, such as unions, also helped.
In another noteworthy technique, Nationwide made its pension-related electronic learning module compulsory as of September 2017. However, to maximize the effectiveness, education needs to be an ongoing process, said Baines. “It’s never finished.”
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