As most retirement schemes are being scaled down, Barnardo’s pension plan has proved a key weapon in their battle to recruit and retain talent, says Debbie Lovewell
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In business, there is often very little place for nostalgia. The desire to keep pace with a rapidly changing world means tradition can easily be passed over in favour of the latest technology, must-have workspaces and the need to keep up with competitors.
Barnardo’s, however, is steeped in tradition. While the organisation has undergone numerous changes since it was founded in 1867, it has not lost sight of where it has come from. Its head office, for example, is located on the site of Barnardo’s original girls village in Barkingside, east London, which still features some of the site’s original cottages dating back to the late 1800s.
And how many organisations can claim to offer a benefit that is over 80 years old? For Barnardo’s has taken care of employees’ retirement needs by providing a generous pension scheme since 1918. Today, it is one of a declining number of organisations that offer a defined benefit (DB) scheme to all staff. The man responsible for the scheme is Barnardo’s pensions manager, Graham Brown. He explains that the reasons behind the charity’s decision to retain a final salary pension can be traced back to some of its original values. “It is very paternalistic. To me, if there hadn’t been this paternalism, we wouldn’t have occupational pension schemes today.”
Two popular pensions beliefs are that DB schemes are the key to recruiting and retaining top staff, and that organisations outside of the public sector may as well accept that they will be unable to compete with the generous government-funded schemes. As Barnardo’s has demonstrated, however, neither is necessarily true. With the majority of its staff hailing from local authority roles, it has to ensure that it remains one step ahead if it is to successfully compete. “About 70% of our staff come from local authorities so we’ve had the problem of ensuring that we could [be viewed] adequately by staff. We need to be able to go out there and know that we can encourage people to come and join because our benefits structure gives them at least as good as they are getting in a local authority. Our pension scheme has always been better and that’s something we’ve always wanted to maintain,” explains Brown.
It was this need to remain competitive that prompted Barnardo’s to raise the scheme’s retirement age from 60 to 65 for all new employees in 2001. “Originally, the scheme had a one-sixtieth accrual [rate] and a 6% [employee] contribution with 60 as the retirement age. We recognised the need to try to retain our social work staff who were drifting off to local authorities because they had 65 [as a] retirement age. We were losing them in their mid-fifties and it seemed crazy when there was a shortage of social workers to be waving them goodbye.”
As a charity, however, funding is not always easy to come by so staying one step ahead can be a challenge. Brown experienced this firsthand following the discovery of a £43 million pension scheme deficit in 2003. “We’ve been up against it trying to get sufficient funds to cover the scope of the work that we actually do and it’s going to be an ongoing situation. With the deficit, Barnardo’s was in a position where it had no more money it could put in [to the scheme] contribution-wise. It will be putting in a £10 million lump sum on 31 March 2005 but the remainder of the deficit had to be controlled through changes in benefits,” says Brown.
The answer was a choice of four options, which were offered to all employees. First up, the longer-serving members of the scheme could opt to raise their retirement age from 60 to 65 to bring their terms into line with those of their newer colleagues. Those that wanted to retain the same terms as the original scheme, meanwhile, could do so by raising their contribution from 6% to 13.5%.
Staff were also offered the choice of two new accrual rates: one-ninetieth, which increased employees’ contributions by an extra 1% of salary, or one-seventy fifth, which would cost them an additional 4% of salary.
Brown felt that it was important to offer staff a choice. His theory was proved correct when each of the options attracted a significant number of employees. “Something I’ve always felt passionately about is that you can’t impose a single option on members because they are all at different stages of their working life. Some that are very close to retirement could have been very badly affected had we just said ‘this is what you’re going to get and nothing else’. It just proved the point that if you give people options, they will take them.”
In keeping with the charity’s caring image, Brown also wanted to give staff a chance to make sure they had made the right choice for them. Employees, therefore, have until 31 March this year to change their minds. The only exception is for those that elected to increase their contribution level to 13.5%. “Due to the sheer scale of that [decision], we felt that any additional financial burden on them personally could have a dire consequence on their pension. So we decided they could move at any time from that particular option to one of the others,” explains Brown.
Such measures were considered necessary if Barnardo’s was to avoid creating a culture of mistrust and resentment among employees. So ensuring that staff understood the reasons for the change was vital. “Any type of change causes problems. The hackles go up because [people] don’t like [change]. Even though [they] might recognise the need for it, the fact is [they] don’t want it unless [they] can’t help it. Because we’ve been going for so long, we’ve only ever increased benefits so this was the very first time we’ve ever had to go to [staff] and say ‘we’ve got a problem, you need to help us. Barnardo’s is doing all it can but for the first time, we’ve got to ask you to take a cut in your benefits to help us out’,” explains Brown.
In order to explain the options to staff face-to-face and boost employee buy-in, Brown embarked on an ambitious consultation programme. During a five week period, he held 41 pensions roadshows for staff and covered a total of 3,500 miles. “So many people have been bitten in the past by poor advice and the mis-selling of products, they are very wary of people just wandering in and talking about pensions. So the mere fact that I work for Barnardo’s and am a member of the scheme means I’ve got instant ears for anything I want to tell them.”
He was particularly keen to run the programme in-house and conduct each roadshow personally to ensure that the message remained consistent. “They needed to see me face-to-face [and] recognise that I was one of the people that was affected. It was important that there was only one set of answers and that was why I had to control that. Others could have put a slightly different slant on things and that could have caused confusion.”
Communication is something that Brown is passionate about. He particularly advocates the personal touch in order to establish a relationship between himself and staff. The theory is that employees will then be more comfortable approaching the pensions team should a problem arise. And knowing that Brown will face the same issues as them as a scheme member is thought to help strengthen employees’ trust in their employer. “It’s important to us that members are always kept up to date, that our communications are the best we can provide and that we’re always available. One of the things I have always majored on is pension clinics; [holding] one-to-ones in people’s own backyard. I’ve seen around 6,000 members in the last 10 years.”
Like Barnardo’s itself, there is little doubt that Brown and his team are in the business of caring. Their catchphrase says it all: “Our team has it’s own motto: Commitment, patience, respect. And that’s how we view everything we do.”
Career profile
Barnardo’s pensions manager, Graham Brown, has a wealth of experience in the pensions industry with a career which spans 34 years. He has worked for the childrens’ charity for the past 11 years, after joining from advertising agency D’Arcy Masius Benton & Bowles. The move involved adjusting to quite a different set of organisational values. “This is the first time I’ve ever worked for a non-commercial organisation and it’s a very different atmosphere. Part of it is the caring nature of the business itself. It’s ancient and steeped in history,” explains Brown.
He cites his work at Barnardo’s as among his greatest achievements, particularly the change programme that he embarked upon in November 2003. “It was the first time in my working lifetime I’ve had to deal with anything of this magnitude. You can plan these things to the Nth degree but until you go out there to try to get everything working you do not know whether it will work or not and that’s the big problem. That’s why we were so happy at the end of the day because we had tried to think through everything and we really had done.”
And his achievements have not gone unnoticed. In 2002 and 2004, he was awarded ‘Pensions Manager of the Year’ by separate pensions periodicals. “Winning [the title] twice in three years is a big achievement. Being recognised for the work you do by your peer group is outstanding,” says Brown.
Barnardo’s at a glance
Thomas Barnardo was en-route to China to work as a medical missionary when he stopped in London to train as a doctor. After seeing the extent of child poverty in the capital, Barnardo opened a school in 1867 to provide poor children with a basic education followed by his first care home three years later.
The charity, which was then known as Dr Barnardo’s Homes, was also responsible for founding the first fostering scheme, by placing babies of unmarried mothers into “respectable families”.
In 1948, the duty of caring for homeless children was placed on local authorities, which prompted Barnardo’s to focus more on assisting families.
In the 1960s, it began to downsize its care homes and develop its work with disabled children and those with emotional and behavioural problems. It continued to expand in these directions throughout the 1970s and 1980s. 1988, saw the name change to Barnardo’s in order to mark its departure from its Victorian roots - the following year it closed its final care home.
Today, it runs over 350 services and employs 6,300 staff helping young people in need.
Employee case study
Martin Runchman is a legacy manager who is responsible for increasing public awareness of Barnardo’s. He has worked at the charity for 40 years.
He places a high value on Barnardo’s defined benefit pension scheme. “Pensions really become an issue in later life but require decisions [during the] early years of employment. Barnardo’s pension scheme provides an excellent financial package.”
The changes brought about by the scheme’s deficit have done little to curb his enthusiasm.
Runchman has an equally positive view of the way that the situation was handled and particularly valued how it was communicated to staff. “I was really impressed with the way they went about that. It was very consultative, quite open about the difficulties and put forward some very carefully thought out proposals.”
He adds that he also appreciated the fact that employees’ opinions were listened to and considered throughout the process, with changes to the proposed options being made as a result.
Benefits box
Pension: Defined benefit scheme open to all employees, choice of three accrual rates. Employer contributions of 11.6%. Variable staff contributions.
Work-life balance: Range of flexible working options available to all staff. Organised locally to suit business needs.
Holidays: 27 days, five extra after five years service.
Interest-free loans: Available for season tickets.
Discounts for local or on-site facilities: Negotiated locally. On-site crÀche with priority places for staff at Barkingside-based head office.
