Following the recent strikes in protest against pension adjustments, Charlotte Moore looks at best practice engagement and communications processes to minimise member unrest when pension schemes undergo changes

There has been a recent spate of industrial action as workers have resorted to striking to protest against proposed changes to pension provision. Both private and public sector employees have been involved, including Marks & Spencer staff in Ireland as well as firefighters in England and Wales.

The recent upswell of employee discontent over changes to pension provision illustrates how important it is to manage any proposed changes to pension provision effectively to ensure that changes do not cause significant disruption.

Union influence

A higher proportion of public sector employees are members of a union than in the private sector. However, unions can also be a significant force within certain industrial sectors and at individual companies. That should be welcomed rather than feared by companies wishing to make changes to pension provision.

DLA Piper pensions partner Tamara Calvert says: “If there is a unionised workforce then collective bargaining agreements are usually in place and pension provision usually falls within this arrangement.”

Before any material changes can be made, the unions have to be consulted. “That can be helpful because the battle over the changes can be had with a smaller group of people who are usually quite knowledgeable,” says Calvert. Once agreement has been reached, the employer can then say to its employees that it has been recommended by the union, she adds.

Communicating without unions

Companies without a unionised workforce face a different challenge. “The company then has to consult a disparate group of employees who will have different levels of understanding about pensions,” says Calvert.

Communicating with a disparate group of employees takes more effort. Aon Hewitt head of communications Anne Oliver says: “The secret to a successful benefit review is planning.” A company should work backwards from when a proposed change should take place.

“From that proposed date, there needs to be a period for implementing any changes as well as the consultation period, which could be either 60 or 90 days depending on whether these changes are being implemented under pension or employment law,” says Oliver. The company also needs to plan what they need to undertake in order to be ready for the consultation.

Communication strategy

As well as mapping out a detailed timeline for the changes, it’s vital that the company thinks about the communication strategy that it wants to implement. Oliver says: “The employer needs to determine what it wants to achieve, how it will measure whether it has achieved its goals and who the stakeholders are.”

The stakeholders might be broader than originally anticipated. As well as communicating with the employees who will be affected by the changes, the trustees and their advisers will have to be involved. “Both internal and external communications should also be included in discussions,” adds Oliver.

Once these steps have been put in place, the communication requirements should be broken down. Calvert says: “A company has to have a very clear strategy about how they are going to communicate, when they are going to communicate and what they are going to say.”

Oliver says: “There are some legal requirements - they must include a note of the proposal, some background to why the proposal is being made as well as the potential impact on the individual employee and the process for consultation.”

How the communication strategy is delivered for those four broad topics will depend on the type of alteration being made as well as the time there is to communicate these changes. But some areas are more important to get right than others. “The key message is the potential impact to individual employees because the first question an individual will ask is: ‘What does this mean for me?’” says Oliver.

Communicating the impact of changes for an individual member can be approached in a number of different ways. “For some companies we have drawn up 30 example members and sent the one that most closely represents the individual to each employee. For others we have drawn up a personalised benefit illustration that shows the differences between the current scheme and the proposed changed arrangement,” says Oliver.

Cost consideration

Some argue that it is always worth the time and the expense to ensure that each individual knows exactly how the changes affect them. Shilling’s head of innovation and business development Alex Thurley-Ratcliff says: “Showing how the individual will be affected by the changes takes a lot of the stress and the worry out of the situation. It is a costly exercise but it is by far the most effective approach.”

It’s important that companies keep the relative costs in perspective. “Changes to a pension scheme might save the company £2 to £4 million and while an individualised communications campaign may cost up to £200,000, it’s still money well spent,” says Thurley-Ratcliff.

However, it’s not just about putting together the right communication materials, it’s also important to get the right personnel involved in delivering the message. AHC chief engagement officer Karen Heath says: “We encourage employers to put the right support mechanisms in place, using both line managers and the HR departments.”

That involves giving both line managers and HR staff the right tools. “We put together briefing packs that outline what they can tell their members when asked questions, and just as importantly, telling them what they cannot say,” says Heath.

The need for context

Giving some context for why these changes need to happen can make it easier for employees to swallow what is usually a bitter pill. Thurley-Ratcliff says: “People are much more willing to accept changes when they understand why they have to happen.”

Private sector employees understand that companies exist to make profit so it is easier for the workforce to accept if pension costs have become too costly. Heath says: “If the company explains that the current pension scheme is untenable as it as, then employees will understand.

“Employees might not like the changes that are being proposed but if it’s a choice between a reduced level of pension on retirement now or a drastically reduced pension in the future, they will understand,” says Heath.

When it comes to making unpalatable changes to pension arrangements, honesty really is the best policy. Thurley-Ratcliff says: “It’s vital to act with complete transparency, integrity and honesty: telling them what you are doing and then do it.”

Neither should communications emanate from a faceless corporate entity. A senior executive needs to take control of the project. “It helps to have both a face and name to the changes. That reduces the ‘them and us’ mindset among the workforce,” says Thurley-Ratcliff.

Companies cannot afford to rush any stage of the process. All too often the consultation period takes longer than anticipated, and companies want to stick to their deadline and try to force employees to agree to the changes in too short a time period.

LCP partner Mark Smith says: “For the company to have a positive outcome there needs to be enough time to allow people to agree to the changes once the consultation has ended. There needs to be resources made available to answer any outstanding questions.”

Managing pension changes is a complex process with lots of moving parts that necessitates plenty of forethought. Companies make the process even more challenging if they try to rush it.

Thurley-Ratcliff says: “Complex changes are technically challenging but it’s much more problematic when companies address the communications strategy too late in the process and do not give themselves enough time to plan it effectively.”

Many changes have been made to UK pension schemes in recent years. That’s positive for any schemes which have a major change to implement in the near future – they can tap into a deep well of expertise that can ensure that even the most unpalatable changes that require consent can be managed in a way that does not threaten the long-term viability of the business.

Written by Charlotte Moore, a freelance journalist

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