AUTO ENROLMENT AND THE M&S EXPERIENCE with Julie Parker Welch

Transcription

1 AUTO ENROLMENT AND THE M&S EXPERIENCE with Julie Parker Welch

2 AGENDA About Marks and Spencer History of Marks & Spencer pensions The Master Trust New scheme design Investment choices The experience

3 A bit about Marks and Spencer 1884 Michael Marks opened his first Market Stall in Leeds the penny bazaar 1894 went into partnership with Tom Spencer Now has 70,000 permanent employees in UK and 8,000 outside the UK 80% of our employees are part time 80% of our employees are female 700 stores in the UK from Simply Food to flag ship stores 21 million people visit our stores every week Our business split half between food and half general merchandise We are the number one provider of womenswear and lingerie in the UK

4 M&S Pensions DB scheme closed to new entrants in ,000 pensioners 50,000 deferred member 13,200 employees still earning benefits Assets c 7bn Defined Contribution scheme for other employees Prior to October 2012 voluntary joining Take up rate c20% Therefore c45,000 employees in no pension Lots of paper and manual administration Needed to be updated to meet automatic enrolment legislation

5 How does our Master Trust work? Any employer can join and there can be different terms: Fees Investments A set of Trustees are charged with: Ensuring members interests are looked after Reviewing administration Reviewing investment choices are appropriate Dealing with UK Regulator Life assurance cover included The Employer has a Governance Committee Retirement flexible after age 55 Members have access to get help to buy an annuity

6 Your M&S Pension Saving Plan Employee contribution M&S contribution Foundation level (Auto enrolment default) Available immediately to all employees Premier Level Available to employees who complete two years membership 3% 6% 6% 12%

7 The new M&S pension plan Tried to keep it simple Everyone can join immediately at same level Enrolment under Contract in line with AE requirements All employees treated the same A lot of challenges: 25,000 temporary staff Staff turnover Administration Cost Communication

8 The M&S investment choices 1 default Lifestyle 1 other Lifestyle fund Moderate 10 choices Long Term Growth Balanced Growth Mixed Bonds Property Shariah Emerging Market Equity > Mixed Growth > Global Equity > Cash > Corporate Bonds > Socially Responsible > Index Linked Gilts Look at our website

9 Why these investment choices? Who are our membership? Low paid Most not financially aware Variance in age and service Low member engagement White label funds so we can more easily adjust Use of Passive wherever possible We don t believe that active management can consistently out perform the market Passive is cheaper and that is important to our members Charges are the current political concentration A Lifestyle fund that could change as member nears retirement A need for a default fund - legislation requires that members need not make any choices

10 Movement of members from old Scheme to new Transferred old funds to new ones c 160m - managed by Legal & General List of member data and investments as at 30 June 2012 Break down of White Label funds into the component investments - 9 companies and 15 different funds and mainly active management In-specie transfer where feasible - Pre-investment of 95% of the cash where not possible Some reregistered Property & Shariah Members had statement from closing fund and opening statement difference was due to market improvements No member was worse off. Cost of the transfer underwritten Whole process took 8 weeks Full independent audit undertaken NO LEGACY SCHEME

11 So what happened - systems We have had a lot of challenges caused by the way we employ people People move within payrolls can t change their enrolment date People go through as leavers and then change their mind Temporary staff being extended Very inflexible systems both sides Data NI numbers, date of birth, sex Also limitations in providers systems e.g. People do have negative adjustments People do have pay stopped after payroll processing Issues with flexible earnings Lots of problems with contribution reconciliation We just didn t think of it all There continue to be manual adjustments 5 months on we are still having issues

12 So what happened - communications We worked hard on communications Focus groups October 2012 we wrote to all employees to tell them what to expect November wrote to everyone who would be enrolled in February In January reminded people that deductions start in February February sent enrolment notices Posters changed monthly Large store visits Help line manned by both L&G and M&S The biggest response we got was to the short letter

13 The end result Opt outs much lower than we had expected C25,000 new members The low number of calls to the helpline indicates either: We had clear communication that everyone understood They are all happy to be enrolled as they understand the benefit of pensions Other than with individual conversations explaining the issue is impossible The letters are all in the drawer It s cost a lot - higher pension contributions and admin costs Apathy is very real In just a few years there will be employees saying: - they didn t understand

14 QUESTIONS?