Heineken's Carol Young talks to Helen Morrissey about the challenges of helping staff understand their DC default strategies.
Helen Morrissey: Can you tell me why you decided to move to DC and how you approached the issue with staff?
Carol Young: Scottish and Newcastle was acquired by Heineken in 2008. A 2006 valuation of the pension fund indicated liabilities which grew to £570m in 2009. The volatile environment meant we could have seen liabilities grow to £1bn by 2012 so we knew we had to do something.
We began a consultation on finding a solution that would be sustainable while also being seen as an acceptable replacement to the DB scheme. We wanted it to be based around informed choice and engagement with colleagues as under the new scheme we would see 40% of the workforce joining the scheme and making contributions for the first time. Heineken has a very diverse workforce.
For instance around 50% of employees do not have access to either email or internet at work so we had to put some thought into how to communicate with people.
We also had to strike the tricky balance of ensuring workers realise they have to take responsibility for their plan while still knowing we will support them. We did this through a number of different channels such as company presentations. Overall 97% of the workforce chose to join the scheme and everyone joining after July 2011 will be auto-enrolled.
Helen Morrissey: Tell me about your default investment strategy and how you communicated it to members?
Carol Young: Once we got people to say they wanted to join the scheme we then asked them how involved they wanted to be in their investment. The fund range we offer comprises three lifestyle funds: balanced, opportunity and aggressive with a wider core fund range on offer for those who want to take a more active approach.
Around 90% of people are in one of the lifestyle funds with 40% in balanced, 35% in opportunity and 15% in aggressive. We decided to describe the lifestyle funds relative to each other to help people to understand and make some kind of risk assessment. For instance if you look at the asset allocation of each of the funds you will see there is no emerging market exposure in the balanced fund while in the opportunity fund it is 10% and 20% in the aggressive fund.
We wanted people to realise where risk came in. I think we tend to underestimate how overwhelming such a decision is for people.
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