Wednesday, 1 December 2010

Why Member communications in DB schemes matters

Why Member communications in DB schemes matters - and how to know if you have achieved your communications objectives

It is something of a cliché to say that we live in a world of communications overload with all of us bombarded daily with a huge variety of messages on an ever increasing number of media. Sometimes, as with social media like Twitter or Facebook, we choose to participate (or not) but even if we remain aloof from these fashionable clubs we still have to wrestle with a superfluity of information, commercial offers and bewildering chPA Dec10oices via more traditional channels. Given this media explosion those of us connected with the world of Pension Funds can perhaps reassure ourselves that we are much more modest in our communications activities with Fund members. This is changing with new disclosure regulations coming into force and certainly the world of communications for DC schemes is becoming more complex and challenging. But for DB schemes it is different. The average Pensioner member of a Defined Benefit Pension scheme will perhaps get one formal communication a year from the Fund plus, if he chooses to ask for it, a copy of the Fund’s annual report and other standard material. Actives will also get regular statements which record their individual pension position plus, perhaps, invitations to subscribe to AVCs. In addition some funds have websites and webcasts – mainly for Actives - but that’s about it. Is this sufficient and should DB schemes’ Funds be doing more – and how do they know if their communications are achieving the Fund’s objectives?

One of the core principles of communications can be summarised in the shorthand “Stimulus and Response”. In short every communication that anyone issues requires a response and should be designed to elicit that response. So, for example, an advertisement from a Motor Car manufacturer (the stimulus) will generally be seeking the response from the target group it is aimed at of being put on the short list of possible cars that the purchaser will consider. Responses can also be more passive and subliminal. Corporate Advertising responses are usually measured over time to see if a company’s reputation among its target group members has risen as a result of the advertising. The key word here is “measured” – where communications are required to elicit something other than a purchase (where hard sales data will tell you if you are succeeding) then you have to find a measurement mechanism to tell you if you are being successful.

Most communications with members of DB schemes are not designed to achieve an action response – i.e. the Fund members are not usually required by the Fund to do anything directly as a result of receiving the communication. Funds communicate with their members to inform them and to reassure them – especially to try and demonstrate to them that the Trustees are protecting their interests. There is also, of course, the statutory responsibility that all Funds have to ensure that key data about the Fund, and any material changes that have been made to the Fund, are properly communicated. So how can Trustees know whether their communications are being effective – in other words that the stimulus that the communications represent are achieving the desired response? The absolute necessity here is to measure this and to track it over time. Two research methodologies can help us. Qualitative Research digs deep with members of the target group to identify their behaviour and opinions – one-to-one interviews and focus groups are typical ways of doing this. The respondents are selected randomly from the population but it is common to have different groups for each subset of the population that are of interest – different age groups or genders for Pensioners for example. Qualitative Research gives you a feel for attitudes and opinions but it does not give you statistically significant results. For this you need Quantitative Research in which samples are much larger but which ask less potentially discursive questions. A sample size of around 400 might be typical in a DB scheme which wants to know the effect of communications on its say 20,000 Pensioner members.

So after creating the stimulus we measure the response and the final step is to complete the feedback loop by refining the communication in future. So, for example, if one of the communications objectives is to try and ensure that all Fund members are aware of the “funding ratio” of their fund and why it is important then Quantitative Research will tell you statistically whether you are succeeding and Qualitative Research will help you understand why – and help you improve your communications next time around.

Paddy Briggs is a Member Nominated Trustee Director of the Shell Contributory Pension Fund. He writes in a personal capacity and the views he expresses are his own.

© Pensions Age

Monday, 1 November 2010

The Pensioner as stakeholder

Little more than a year ago my interest in the subject of pensions was confined to a natural concern about my own and how to live comfortably on it – now and in the future. Then the news emerged that I had been successful in the election held amongst the 38,000 Shell pensioners in the UK to become one of the two directly elected (by pensioners) Member Nominated Trustee Directors (MND) of the £11.4billion ShellPA Nov10 Contributory Pension Fund (SCPF). Given that I cannot claim to have any knowledge of, nor experience in, the arcane world of pensions you may wonder why I stood for election and, perhaps even more, why the Shell pensioner community chose me ahead of the other 22 candidates. The answer, I think, is that I firmly believe that pensioners are stakeholders in the enterprises that provide their pensions – both the funds themselves and the companies that sponsor them. And stakeholders of any organisation, and especially those of powerful multinational corporations, need articulate and determined representatives to protect their interests. I undertook to try to do this and the electorate put their trust in me that I would – so how is it going?

From the start the trustee training that I received, whether provided internally or by external agencies like the NAPF, emphasised the extent to which everyone in the world of Pensions, from the Regulator to professional bodies to corporate sponsors and the schemes themselves, was concerned that all trustees have adequate “knowledge and understanding”. Fortunately it was made clear to me that I was not expected to become a Pensions expert or to start practicing any of the many disciplines that operate in and around pension funds - and a good job too as many of these relate to the Law and to Financial Management neither of which would be my specialist subject on Mastermind! In my 37 years with Shell companies around the world I was fortunately never responsible for providing legal advice or for compiling statements of accounts. But as a member of various management teams over the years I did contribute, I think, beyond my own expertise areas of marketing and brand and communications. I was never shy about expressing an opinion nor nervous of asking the stupid question – characteristics which, I hope, will stand me in good stead in my Trustee role.

I am, then, an amateur trustee with no pretensions that in time I will become a professional one. I will continue to do my best, as the law requires me to, to become more knowledgeable about pension matters and there is plenty of help available to enable me to do this. Fortunately other directors of the SCPF Trust are experts in the various pension disciplines – as, of course, are those in our Trustee Services Unit, in Shell’s Investment Management company and in our various advisor agencies. The amateur trustee, like all the other trustees, has a statutory duty to represent all members at all times - but unlike the professionals he should be able to question or challenge without fear of revealing ignorance on matters on which he is supposed to be informed. Clearly you don’t want to be asking the same daft question too many times – but you should not be afraid of asking it in the first place. The Shell scheme permits any member to stand for election to the Trustee board from either the Actives or the Pensioner communities. I am biased, but I do think that this system is much preferable to that operated by some other large schemes where prospective MNDs put their names forward and are then chosen, in a selection process, by existing Board members.

A little under a year into my trustee role I am hugely enjoying it which, I hope, means that I will be able to contribute more effectively than if it was a chore. The Shell fund, a DB scheme which is still open to new entrants (albeit with slightly reduced benefits) and which is fully funded with a small surplus is in a comparatively good position. But legislative changes and social and political pressures are going to impinge one way or another on our fund and its members and the fact that the world of pensions is so much in the spotlight adds to the significance and to the challenge of the trustee role - we live in interesting times!

Paddy Briggs is a Member Nominated Trustee Director of the Shell Contributory Pension Fund. He writes in a personal capacity and the views he expresses are his own.

© Pensions Age