McDonald’s sees low pension opt-outs

EXCLUSIVE: McDonald’s Restaurants has seen 2.4% of its hourly-paid employees and 2.7% of its salaried employees that were auto-enrolled on 1 January 2013 opt out of pensions.

The fast food retailer has 37,000 UK employees who work directly for the organisation (rather than its franchises). Of this group, 35,000 are hourly-paid and 2,000 are salaried employees.

Among its salaried workforce, 900 staff were already members of the stakeholder defined contribution (DC) pension scheme. An additional 1,100 salaried staff were auto-enrolled into this scheme and more than 9,589 hourly-paid employees were auto-enrolled into the National Employment Savings Trust (Nest) in January.

Neal Blackshire, benefits and compensation manager at McDonald’s Restaurants said: “We have a young workforce and, because the auto-enrolment regulation requires us to auto-enrol employees only if they are at least 22, a good proportion of our employees didn’t have to be auto-enrolled. Some part-time employee [also] didn’t hit the qualifying auto-enrolment threshold earnings.”

Pension scheme structure

The stakeholder scheme, which is provided by Friends Life and has been in place since December 2001, offers varying contribution levels based on employees’ age and length of service, where the length of an employee’s service is added to their age to define where they fit into McDonald’s pension structure.

For employees under the age of 35 (calculated on their actual age plus length of service), a minimum contribution of 3% of annual salary is matched 1:1 by the employer, up to a maximum employer contribution of 4%.

For employees between ages 35 and 54, a minimum contribution of 5% of annual salary is matched by the employer at one-and-a-half, up to a maximum employer contribution of 7.5%.

Employees who are aged 55 and above receive a 1:2 matched contribution, with the maximum employer contribution at 10% of annual salary.

All employees who were auto-enrolled in January, whether this was into the stakeholder scheme or Nest, receive the minimum compliant employer and employee contributions based on qualifying earnings.

Blackshire added: “We have said to our salaried employees that they’ve always been entitled to pension membership and that they will be auto-enrolled. However, if they want to increase their contributions from 1% of qualifying earnings to 3% of their annual basic salary, then they [can do so].”

As a result, 2.6% of salaried employees who have been auto-enrolled have increased their contribution levels.


Blackshire credited the low opt-out rates to a comprehensive communication process in the last financial quarter of 2012. This included briefing emails for senior managers, and information on McDonald’s Restaurants intranet site and online portal, OurLounge, including a link to the Department for Work and Pensions’ auto-enrolment advertisement.

Blackshire added: “It gave us the opportunity to explain that auto-enrolment was coming, it was a new government-inspired scheme and it was going to affect everybody. We had to be careful about the information on the portal because that site is seen by franchisee employees as well. So we made it plain that auto-enrolment was coming for everyone, but for the company sooner.”

This was followed with email notifications In November 2012. In December, the organisation used payslip messages to reiterate that auto-enrolment was coming. It also wrote to existing members of its closed defined benefit scheme and stakeholder arrangement to inform them they were already in a qualifying scheme.

Opt-out levels

Blackshire added that the low opt-out rates could also be due to employees planning to enrol in the pension scheme anyway. He said: “I’ve heard feedback from employees who have said that they were looking to set up a pension scheme, but they are grateful that we have done it for them.

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“There’s also probably some inertia in the population, in the sense that their contributions aren’t ridiculous and people are happy with the status quo because they think it’s a good thing to do.”

McDonald’s Restaurants eligible employees in franchise-run restaurants who are not currently pension scheme members will be auto-enrolled from 1 September 2013 onwards.