Nationwide Building Society updated its defined contribution (DC) group personal pension (GPP) plan to default 12,000 scheme members on to a higher contribution rate, to ensure staff access the maximum employer contribution and to help improve retirement outcomes.
Following a benchmarking exercise in 2014, Nationwide found that the majority of its DC members had opted to pay the minimum contribution of 4%, which attracted a 9% employer contribution for staff with more than two years’ service and 5% for those who had been with the business for less than two years. Just 9% of members had chosen to increase their personal contribution above this level.
To improve employees’ retirement savings and ensure all members took advantage of the maximum employer contribution available, aligning with the organisation’s core principle of ‘doing the right thing’, Nationwide decided to re-design its core contribution level to which employees are defaulted. As a result, it increased this to 7% employee contribution. It also took the decision to increase the level of life assurance from four-times salary to eight-times salary.
The changes were introduced gradually, beginning with a communications campaign in March and April 2015 to raise awareness around pensions and savings generally. It then officially communicated the scheme changes between July and September 2015. Communications included an animated film, manager and team briefings that included news stories, poster competitions, face-to-face presentations and roadshows.
The higher default level was implemented in January 2016, with a new core employer contribution rate of 13% subsequently introduced in September last year. If employees wanted to opt down and return to paying a lower contribution rate, they have the opportunity to do so during the organisation’s flexible benefits election window between October and November. Every year, the contribution level re-sets to the core default contribution level, meaning employees have to make an active decision about their pension contribution level on an annual basis.
In January 2017, 84% of DC scheme members had remained at the higher contribution level.
In May, Nationwide will introduce Hymans Robertson’s Guided Outcomes retirement planning tool to further aid staff in preparing for their retirement. The tool will enable employees to set their retirement savings target and check whether they are on track to achieve this, as well as give suggestions on how to improve the likelihood of reaching their pensions savings goals.
Ian Baines, head of pensions at Nationwide, says: “We felt if our employees were not likely to be on track for a good pension outcome at retirement, that wasn’t a good thing for us as a responsible, good employer. We felt the right thing to do was to pay [a higher] contribution into their pension so they had that good outcome.”