Confessions of a benefits manager: Candid arranges crisis pensions training

The way Big Bad Boss is carrying on you would think there was a global financial crisis. Well, there is a global financial crisis, but surely this is a time for leaders to calmly steer us to a safer place, not to run around like lost children. Sadly, the Higher Beings (as I call our leadership team) are not known for their cool heads, more for losing them.

They first started squawking over our share scheme. Like almost every other company on the planet, our shares have recently plunged to prices only seen in the last century. The shares have rallied a bit now, but still most of our share options and employee purchase scheme shares are under water, meaning they are worth less than when they were initially handed out. For our management team, these shares represent the larger part of their earnings, so effectively they have had a great big pay cut on top of the real one we dished out last month. Sam, the head of sales, has threatened to leave if we do not do something about it. Really? Sometimes, I really do wonder where we get these people.

I cannot magic the share price back up; if anything that is Sam’s job. What he wants is for us to give out more options while the price is low, and he has convinced several other executives that it would be a good idea. However, we are already at our limit. I do not want to have to explain ‘overhang’ and the exposure to dilution for ordinary shareholders from too much share-based compensation. I am not sure I could pull it off, especially to a bully like Sam. Luckily, Big Bad Boss has that little speech perfected and for once I am grateful for his intervention.

Impact on pensions

Thwarted over extra share grants, Sam starts making noise about the pension plan. Most of the funds have taken a hit as a result of the financial crisis, and as fund prices move more slowly than the shares they are invested in, the worst is no doubt yet to come. Sam, you might have guessed, wants the company to top up his pension contributions. Honestly. A defined contribution plan means just that: the contributions are defined and the benefits are at your own risk. It turns out Sam has invested the whole lot in the super-speculative adventurous markets fund because it had the highest predicted return, so really he had it coming. At his age, you would think he would be a bit more cautious.

We do not have the budget to start handing out pension contributions like Smarties just because our leaders are big children. Instead, Big Bad Boss wants me to organise Smarmy Consulting to do some more pension training, so at least our leadership team know what they are doing in future. I can see several problems with that idea. If folks like Sam realise they made some risky investment choices, nudging them to move out of them at the bottom of the market is unlikely to be helpful. It would be far better to leave well enough alone until some things have normalised, or new-normalised, or whenever things have recovered a bit anyway; that would be the time to start making tweaks.

Smarmy’s pension overview sessions cannot give actual financial advice anyway; it can only describe the options. The Higher Beings in C-suite already get financial planning advice paid for by the company, so surely their advisors should be responsible for getting them out of a mess if they are in one. We can run courses until we are all completely fed up with the ‘p’ word, but let’s face it: nobody really listens to anything about pensions; it is so achingly dull. I have thought of recording Smarmy Consulting’s presentation to use as a sleep meditation; I am sure I would nod off faster than listening to Paul McKenna. And then, most of the management team never show up to training of any sort, presumably working on the assumption they know it all.

Pensions training for executives

However, Big Bad Boss knows best, so we are going to run an extra ‘crisis’ session on pensions whether I want to or not. When I explain the brief to Oily Oliver at Smarmy Consulting, he raises the same objections I have made. Now is not the time to encourage anyone to be playing with pensions. I know.

We decide to run the sessions online as it will be cheaper and we might get better participation that way too. We will focus on explaining the lifestyle strategy funds, keep discussion away from doing anything too radical.

I have also asked him to cover the impact of pensions freedom again and to explain how the ability to draw down cash rather than buying an annuity might lead for a different investment strategy. I have asked for that to be addressed mainly because I would like to understand our plan options better myself. We now have two default lifestyle investments: one for drawdown and one for taking a lump sum. The drawdown lifestyle strategy means that much less investment is moved into cash over time, with only a tiny proportion held cash even after retirement. This is because, in theory, a drawdown strategy leaves funds in longer to recover from any crisis. I get that, but I would like to better understand the theory behind the percentages used. This is perhaps beyond the remit of a general training session, but I ask Oliver anyway; we might as well get something for our money.

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Sure enough online participation is a bit higher than when we run classes in the office, but still none of the leadership deign to turn up, not even Sam. I show the stats to Big Bad Boss and I am totally vindicated for my earlier objections. No, he did not come to the training either. He knows it all.

Next time… Candid considers the inequity of working parents.