NAPF Annual Conference 2014: Drinks company SABMiller will launch additional savings vehicles after one in five workers opted out of its UK defined contribution scheme, with reductions in tax relief a principal factor.
Opt-out rates have been seen as key to auto-enrolment’s success. SABMiller’s 20 per cent opt-out rate among its 700 UK staff was around double the average of the larger employers that have staged.
Roger Fairhead, group compensation and benefits director at SABMiller, said it intends to offer a self-invested personal pension plan and a save-as-you-earn scheme after recognising an above-average proportion of its workforce is affected by the annual and lifetime allowances.
More than 10 per cent of its employees are impacted by the annual and lifetime allowance reductions to £40,000 and £1.25m, respectively.
“Because of the high level of pension contributions, and also the high salaries, we have a number of employees who are caught by the £40,000 limit,” Fairhead told delegates at the National Association of Pension Funds’ annual conference.
He said 4.8 per cent of the company’s employees have an immediate annual allowance problem and another 5.6 per cent will have an annual allowance problem within the next three years.
The company also offers employees a corporate Isa and share incentive plan.
Fairhead said the company has to manage the regulatory risk of making sure people who are not approaching the annual and lifetime tax thresholds are not encouraged by the company to opt out and that it is the right decision for them.
However he said: “At the end of the day, though, if people have the right information and they can make an informed, educated decision about it then we should allow them to do so.
“It might be that to get around that particular problem we have a minimum level of pension contribution that they have to make but the excess – because as you can see our pension contributions are relatively generous – we have to say you have to put that amount into pension but the rest you can take in a different way,” Fairhead said.
Advising employees
Fairhead told attendees SABMiller is also currently considering whether to pay for financial advice for employees at the point of retirement.
Tracey Newton, head of reward at the Yorkshire Building Society, told delegates it is thinking about the extent to which guidance is provided to employees.
“Do we go back to the notion of doing more retirement planning sessions that are bigger and broader than that to help people think about, ‘Actually what does retirement look like for me, when do I do it, is it phased, how do I manage that?’,” said Newton.
She said the building society decided the best way to communicate with employees about pensions is through the same means as they do customers.
“One of the key things we talk about is we want to be a trusted financial organisation, it’s about people, it’s about trust, so what we’re trying to say is, ‘Actually if that’s how we communicate to our customers then we want to do that with our colleagues’,” said Newton.
