Shire Pharmaceuticals is well ahead of the curve when it comes to complying with auto-enrolment legislation.
In the lead-up to its November 2013 staging date, Shire will not face the same compliance challenges as some other organisations. It already contractually enrols all UK staff into its group personal pension (GPP) plan, which has resulted in 98% of these 530 employees belonging to the scheme.
Contribution levels into the Aviva-provided GPP, which was introduced in 2009, are also well above the minimum required under auto-enrolment legislation.
All staff are required to contribute at least 3.5% via a salary sacrifice arrangement. The employer, meanwhile, contributes 8% for the majority of its workforce, although some senior employees receive 15%.This means the minimum contribution that any employee can receive totals 11.5%.
Auto-enrolment is opportunity
Jane Fenwick, associate director, total rewards at the biopharmaceutical firm, says: “For us, auto-enrolment is an opportunity. It’s not a challenge in terms of all of the things it might be for other organisations.
“Clearly, there are things we will have to do in preparation, but these are all focused mainly on establishing processes and tools to support compliance. We don’t have to worry about some other pieces, such as scheme design.”
Instead, Shire plans to use auto-enrolment as an opportunity to further engage employees with its pension, particularly by encouraging them to take a more active approach to their investment strategy.
“It’s interesting because we’ve got [a high] level of participation but, at the same time, we’ve got quite a passive approach to investment,” says Fenwick.
“We’ve got a lot of people participating [in the scheme], but also a very high proportion of the assets under management sitting in the default fund: about 70%. So, through all the work we’ll be doing in preparation for auto-enrolment, one of the things we will be focusing on is trying to shift that a little bit.
Engage people in saving
“I’m looking at it as a way to further our goal, and as an opportunity to further engage people in their retirement savings.”
The first step to achieving this has been to review the scheme’s default investment option. “The default fund was previously a global equity index tracker fund, 100% invested in equities, and we felt we wanted something with less volatility on the basis of our employee demographic, which is an average age of 40, and [low] levels of active selection,” says Fenwick. “[We had] a lot of people sitting in this relatively high-volatility fund.”
Working with its pensions governance committee, Shire decided to switch to a less volatile consensus fund which aims to produce consistent investment performance in line with the average UK pension fund, as the default option from March this year. Scheme members could move across to the new default investment option if they wanted.
“We didn’t transition people across,” says Fenwick. “We informed them about our decision and gave them the opportunity to move investments in the old default fund into the new one.”
Staff who wish to actively invest in an alternative fund can choose from any of the others available via Shire’s pensions platform.
As the first step towards boosting employee engagement with pensions, the organisation is encouraging staff to log on to provider Aviva’s website to access details about their pension pot and make use of modelling tools.
“There’s a really low level of usage online,” says Fenwick. “For me, it’s [about] getting people to use that site so they can see exactly how much is in their pot, where it’s invested, how much that will provide in retirement, and then they can start to question ‘is this going to be enough for me?’.”
Fenwick is building a communications strategy to help achieve this. This will involve a number of new communication channels aimed at reaching the highest number of employees, including smartphone applications (apps) and Shire Pharmaceutical’s internal social networking site.
“It’s about looking at how we drive traffic to that website,” she says. “We have a high proportion of smartphone users, so that’s one easy way of getting to people.
“We’ll be looking at ways to use all the communication channels to tell people ‘you’ve got a great scheme’. We don’t need to talk to them so much about the mechanics of auto-enrolment because they’re used to contractual enrolment, so it’s about reminding them of the value to them and encouraging them to speak to our advisers, have one-to-one sessions, because they’re able to do that at any time, go onto the site, use the modelling tools and think about their retirement.”
This will be the first time Shire has used such methods to communicate pensions to staff. “We’ve used apps in the business for other things, for example our expenses system has an app that staff can download onto an iPhone and do their expenses,” says Fenwick.
These initiatives are aimed at helping staff make the most appropriate decisions in their preparation for retirement, she says. “We just want to guide people along a path to help them make their own decisions and give them all the information we can.”
SHIRE PHARMACEUTICALS AT A GLANCE
Shire Pharmaceuticals was founded in 1986 by a team of entrepreneurs looking to capitalise on unmet medical needs.
The global biopharmaceutical company works with specialist physicians, nurses and pharmacists, as well as with other professionals, to develop and market medicines aimed at improving the quality of life.
It focuses on areas such as Alzheimer’s disease, chronic kidney disease and attention deficit hyperactivity disorder, among others.
The organisation currently employs more than 5,000 staff in 29 countries.
SHIRE PHARMACEUTICALS: PENSION FACTS
Type of scheme: Group personal pension (GPP) plan introduced in 2009.
Key feature: Contractual enrolment for all UK employees.
- Offered via salary sacrifice arrangement since 2011.
- Minimum employee contribution of 3.5%
- Minimum employer contribution of 8%, depending on job level.
- Minimum total contribution of 11.5%
Pension scheme membership: 98%
Auto-enrolment staging date: November 2013.
Pension scheme provider: Aviva
Pension scheme adviser: Hargreaves Lansdown
Pension scheme administrators: Hargreaves Lansdown and Vebnet.