Virgin Mobile is closing its trust-based defined contribution pension scheme citing new trustee obligations as too onerous, and is setting up a group personal pension instead.
Other Virgin Group companies are expected to follow. Caroline Jowett-Ive, reward and policy manager for Virgin Mobile, said the company wanted to avoid the terms of the Pensions Act 2004 which impose a higher degree of responsibility on trustees for the management of pension schemes, including potential personal liability for poor fund performance.
"I think increasingly we’re in a litigious society, and trying to find employees to take on that [responsibility] was quite an ask. I know a lot of the other companies within the Virgin Group are making the same move," added Jowett-Ive.
She said the new group personal pension offers more choice to employees and is a more suitable investment vehicle for its young, high-turnover staff of 1,500, many of whom work in call-centres. "It offers far more flexibility to our employees, that’s the key motivator. Effectively it’s now just a series of individual pensions under one banner. It allows employees to make their own fund choices, and the portability means that if they leave they take the fund with them. People want to be able to invest in ethical funds and those sorts of things, and now they’re going to be able to do that."
Under the new scheme, Virgin Mobile will continue to offer employees matched pension contributions up to 7.5% of salary. The new pension will be introduced on December 1. Employees will be obliged to use the group personal pension, because the existing trust-based defined contribution pension, which has around 500 members, will be wound up.
Virgin Mobile’s staff have a prevalent age between 18 to 24 years, and just a third of employees are members of the current trust-based defined contribution scheme. The company has started a communication campaign encouraging better awareness of the need for retirement saving, using presentations, workshops and individual sessions to highlight key points.
"We’re doing a bit of scaremongering really, you can get these awful statistics [stating] what you’re likely to be living on when you are 60 years old. We’re just really trying to [let staff know] that we’re matching contributions and trying to get them to invest in their future. We will obviously have a default fund that we expect the majority of people will go with," Jowett-Ive said.