This financial services firm acquired Abbey in 2004 and inherited the challenge of different categories of staff having different levels of pension benefits from eight legacy schemes – four defined benefit (DB) and four defined contribution (DC).
After setting up a common trust-based fund and investing £120m into it to ensure the DB schemes would be fully funded by 2016, the company was able to make changes to pensions benefits.
The bank had to level down and harmonise inconsistent terms for the DB members without causing an industrial relations disaster. It improved the arrangements for DC members by introducing a trust-based DC scheme and improving eligibility for, and understanding of, the scheme. It also increased overall contributions. Santander therefore auto-enrolled former stakeholder scheme members and all non-members into the new scheme at a contribution rate of 5% (the company contributes at least 7%). This is particularly notable in view of the recession.
Throughout the process, Santander worked with the unions and ran a comprehensive communications exercise. It also ensured the schemes were compliant with the forthcoming pensions legislation in 2012.
As a result of this carefully thought-through strategy, just 20 out of 6,500 DB members declined to sign the new terms and by mid-January, when this award entry was submitted, 96% of DB members had signed the new terms.
Just 2,200 out of 11,000 employees opted out of the new DC scheme. This is an 80% take-up rate, compared with the previous 35%.
All this was achieved with just a handful of grievances and no negative press – an impressive result for such a major exercise.
Capital One (entered by Secondsight)
This credit card firm works hard to encourage its young staff to save more. Contributions increase automatically by 1% a year (unless staff opt out) and are based on salary, bonus, shift differential and overtime. Other good ideas are the paid-for financial adviser for all and an extra pension contribution based on company performance.
FIS (entered by Secondsight)
This technology provider acquired two small firms and showed a firm commitment to honour pensions promises and increase retirement savings for the transferred staff. Tailored communications improved understanding of benefits and made staff feel appreciated. Now 66-75% should meet their retirement goals.
Freshfields Bruckhaus Deringer Group pension plan (entered by Hargreaves Lansdown)
This law firm replaced two DC schemes with one group personal pension plan. Placing the plan in its flexible benefits scheme using salary sacrifice saved it £500,000 a year (about £290 per employee), which it has shared 50/50 with staff.
NCFE GPP scheme (entered by Alexander Forbes)
This awards body encouraged its lower-paid staff to save for a pension by introducing lower-tier matching contributions for its GPP. It gave all members the full employer NI saved. All staff had one-to-one meetings with a financial adviser. As a result, 90% of eligible staff joined and fewer than 5% took the lower-tier savings option.
Zurich Financial Services ZPen
This financial services firm now has a system that enables it to process its retiring staff in just 10 seconds – down from 10 days previously. As well as the technology to do this, it has introduced face-to-face advice and workshops for retirees. The entire implementation process will pay for itself in two years.
See full list of winners and finalists for the Employee Benefits Awards 2010