The retirement freedoms could place increasing demands on employers. Owain Thomas discovers how one organisation is taking a very hands-on approach.
- Manchester Airports is embracing the freedoms by introducing financial education, advice and flexible drawdown
- It hopes to guide employees to make better retirement decisions
- By supporting them it expects to boost employee engagement and help retention
Many employers are reluctant to even communicate the Budget pension freedoms to employees ahead of April.
Reasons for this range from fears over the potential liability for organisations should decisions go wrong, not wanting to overwhelm employees with more information in an already complex area, and even concerns that an incoming government will tinker further with pensions legislation.
All these are very understandable positions to be in.
However some firms are going against the grain and embracing the changes, warts and all - Manchester Airports Group (MAG) is one of these.
In January it appointed Buck Consultants to administer its trust-based defined contribution (DC) scheme in addition to its existing role as defined benefit (DB) scheme administrator.
Part of this appointment included the facilitation of financial education and advice for members looking to take advantage of the freedoms.
While this is a reasonably common occurrence, MAG also initiated a flexible drawdown facility to let members take advantage of at least one branch of the freedoms directly from the scheme.
Reward director Mark Cliff explains the group has been considering the situation for some time - noting that the decision is all about giving members the choices intended from the reforms.
"We want to work with somebody who can help us empower individuals to take advantage of the new reforms in a way that's going to give them a really good, supportive, member experience," he says.
"The trustees with the support of the group took the view to move from our current bundled package to unbundling it with Buck, so we could actually service it.
"We think we're proactive. We've been thinking about this for six months, how to deliver these services, and we've found a provider who can do it for us. So that's great."
With the government and regulators still formulating their final stance on some of the freedoms it is difficult for those firms that wish to do so to put a concrete structure in place. One of the oft heard complaints about the reforms is not the spirit in which they are intended, but the speed with which they are being implemented.
While concerns have been raised about a potential clash with the ideology of auto-enrolment, by-and-large the moves are seen as positive.
A feeling echoed by Cliff: "So the exact detail isn't yet known because we've got to work through all of that and we're going through the transition process and getting ready for April. But it's all on this principle of support and empowerment and a good experience for our members. That's the driver," he adds.
With that minor caveat in mind, what is the package that Manchester Airports Group will be rolling out to its staff?
"We do pension surgeries within the airport sites and so we have taken a multi-media approach to giving people the access, but it's all under one roof," says Cliff.
"So whether people have got some DB savings with us and DC benefits with us, it's all wrapped together so we can provide that holistic guidance and member experience from one base."
Education and advice
An overall education programme will be put in place including face to face-to-face sessions and even financial advice - something many employers try to steer clear of.
"We've got two pensions professionals who run pension surgeries around the airports so people do get access to pensions experts anyway. And then we will look to the extent that we need to offer further guidance or advice to people and Buck can facilitate that for us," Cliff continues.
"We want to supplement the education and guidance that's going to come through the Government route. We may not be able to provide that level of support through our network of our advisers and where it's appropriate for advice, particularly for our DB membership, and advice is required, we will facilitate that for our members.
"We've got to work out exactly how to do that and what boundaries to put around it but again, for us it's about how do we support and empower our members to make the decisions that work for them."
There are other good reasons for the group being so positive about helping employees gain from the reforms.
It has quite a large cohort of employees around or over 55, with "not enormous" DC pots and who Cliff believes can get much greater value.
"They can use it to plan something really suitable for their circumstances. We're going to help steer them towards the options that are most relevant to them, to help them think about what these changes mean for them. You need to keep it simple and make it relevant and that's what we're doing."
"For our DB populations we will be thinking about those people and making sure they understand before they crystallise their benefits, that there is this new world of flexibility out there that may or may not be in their best interests, but they need to be given the information to enable them to assess that themselves and supported through those decision processes," he adds.
Probably the most eye-catching part of the plan is to introduce a flexible drawdown facility. But this could be fraught with difficulty, expense and extra risk. Why do it?
"It's all about what we believe our advisers and administrators can deliver for us within a robust framework of governance, and service," Cliff continues.
"We take the view that if you can get the due diligence and the evidence to support flexibility done in the right way, then it should be embraced. If there are doubts on the ability of providers to deliver the services, then you need to think twice about it. And we are confident on the ability of our administrators, our chosen providers, to deliver what we need. If we didn't think that, we wouldn't do it," he adds.
As the scheme develops and beds-in, Cliff will begin segmenting the workforce and tailoring messages and services to those various populations.
The first group to be segmented is the over 55s as they will be able to access the reforms immediately.
Those who are close to retirement within the defined benefit scheme are also high on the list.
But as time goes on and experience grows, the group expects to learn and be better able to identify those key groups, whether it is by job type, fund value, age or any other circumstances.
But how does Cliff answer those sceptics - the colleagues and fellow benefits professionals who ask why employers would even consider risking the potential adverse fall back two, three, five years or even further down the line?
"I understand why people say that, but I think that's why it's important to really plan, have really thorough communications and really ensure the information that you provide to your members is clear, consistent, relevant and simple," he says.
"So you can demonstrate that you're going through the right processes and giving people appropriate information. And it's about good systems to do it. If you're committed to those things, then it is deliverable and it will massively increase engagement and interest in the provision and also help our employer brand," he concludes.