GE is one of the world's biggest businesses. Owain Thomas discovers how the firm is tackling the challenge of educating its UK workforce on finance
Business case:
- GE wanted to do more for its retirees than just give them a pension statement and a handshake
- The business wanted to achieve a universal financial education policy for all its UK firms as part of its new flexible retirement process
- Government retirement reforms have helped push the issue to the fore, but lack of clarity makes informing employees tricky
GE (formerly General Electric) is a global behemoth with 305,000 employees based in more than 170 countries around the world. It is involved in dozens of industries and staff frequently spend their entire career with the business.
But just over two years ago, its UK operation began realising that workers were given little support in transitioning from full-time work to full-time retirement. This was not good for the firm or its retirees and was something GE wanted to significantly improve.
I think we may have educated our employees too much – where they’re coming to us, asking what these changes mean
"We have to hold our hands up that we did very little for employees close to retirement," admits European benefits specialist Michelle Newton.
"We were starting to design a new retirement policy, which included flexible retirement, in 2012, so we thought it was a good idea to put a holistic package in place to help support some of our employees as they were leaving. A number of them had been with us for quite some time and all we did was give them a pension statement and a handshake. It wasn't really a good show for GE in terms of how we treated our leavers at the time."
Indeed, as one or two of the firm's businesses made their own informal arrangements, a segmented approach had emerged which proved particularly problematic with an integrated organisation that sought consistency and transparency across the board. This was compounded by a series of changes made to the corporation's pension schemes - including the closure of its defined benefit (DB) plan to new members.
"It dawned on us that we educate our employees so well about their pension that it led to a natural progression to asking about the next steps into their retirement," continues Newton. "It felt as though we were missing a trick and needed to be a lot more proactive."
As a result of this, GE installed Close Brothers to undertake retirement seminars across the country at a range of its sites. The programme has been tailored to meet GE's situation, which includes "countless pension schemes", Newton explains.
Nationwide support
One event a month is conducted somewhere in the country, meaning that all of GE's employees nearing retirement (about 400 a year, out of its total UK workforce of 19,000) will have the opportunity to attend a seminar near them throughout the year. And those that are unable to reach a suitable location can piggy-back onto one of Close Brothers' more generic seminars.
"Attendance usually ranges from 10 to 25 employees who are close to retirement or thinking about retirement (usually within a 12- to 18-month period of their expected retirement date) and they are usually over the age of 55. It's all fully funded by GE to give them the time to have a day out and reflect on what they are thinking about retirement," Newton adds.
The scheme is only in the fledgling stage, with this being the first full year of operation, so the early results are encouraging - about 160 employees have gone through it in 2014 - especially as it is voluntary rather than compulsory. And communications have already begun for next year's courses to build upon this number; however, it will remain voluntary due to the diversity of the workforce.
"Some of our financial advisers would already be quite savvy in terms of what they need to do, whereas some in our manufacturing industry may not be so," Newton explains.
And this appears to be borne out in the take-up rates over the past year.
"It has been our manufacturing industry (aviation, energy, and oil and gas) where attendance has been highest. We've had a few of our capital and healthcare employees joining, but again we're doing a bit more targeted communication showing the agendas now - so they don't think it's always about pensions; they can see it's about lifestyle as well.
"Because once you hear about a retirement seminar, your initial thought is about your pension and when you can claim your benefits, but we wanted them to know it was about a lot more than that. It's about the transition of going from the working life that you've potentially had for 40 or 50 years to moving into retirement and the options available for you," she says.
Good feedback
The programme dovetails nicely with the firm's flexible retirement regime which was introduced in late 2012. This allows employees to begin taking their pension and continue working - something which has been well received.
"We do have really good feedback about that," Newton continues. "We saw a bit of a spike once it was launched with a lot of employees because it gave them a lot more control over what they wanted to do - rather than having this mindset that, ‘I'm 65 - I've got to leave and I've got to take what pension I have.'"
Options taken include reducing hours, starting to take pensions, or switching out of the DB pension and going into a defined contribution (DC) arrangement. And, of course, the incoming retirement freedoms and the government's related guidance guarantee have helped to drive GE's plan forward.
"I think we may have got to the point in GE where we've educated our employees too much - where they're coming to us, asking what these changes mean," says Newton. "And sadly, because it's all very grey at the moment, there's only limited messaging we can do. We're using the opportunity through Close Brothers to link our messaging, so we're very conscious about what we're sharing to ensure we're all on the same page. So if they're going to mention something in their presentations, we also understand it's a message that we've done in GE."
Education or advice?
However, this has proved somewhat tricky given the rapid implementation and slow release of detail from the government about what will and, perhaps more importantly, will not be included. This leads to the ultimate question being tackled by many employers now: How far should financial education go? Should it become the provision of fully fledged financial advice?
"The grey line again is the financial advice that everyone is meant to have prior to their pension. I know we're going to be looking at that as a company. Do we really look to support financial advice or do we just keep it to where it is? So we're still to make our mind up on supporting employees through that," Newton continues.
"We're conscious that employees need it, but it's a double-edged sword - if we put a financial adviser in place and, heaven forbid, somebody makes a judgement call based on that, would we be liable for that advice?
"So we stay very much away from giving advice, but then we want to be helpful to say, ‘Well, here's where you could potentially go'. So we're just trying to work around our messaging on how we can offer support without being perceived to be directing employees down a certain route," she concludes.
Whatever GE finally decides in this circumstance, it is clear that in just two years the business has moved a long way in the support it is giving to staff reaching the end of their careers.
