Reimagining retirement

Roy Brown, UK Pensions Manager at Jaguar Land Rover, explains how his scheme is helping members improve their standard of living in retirement

Like many large employers, we have a combination of a legacy defined benefit (DB) scheme and a defined contribution (DC) arrangement for our current and future employees.

Our DB scheme closed to new entrants back in 2010 and there are still about 8,000 active employees in that scheme. Since then, all our new starters have gone into our DC scheme, which is run by Scottish Widows. As we operate contractual enrolments (i.e. employees agree to join the pension scheme as part of their terms and conditions of employment), everybody goes in on the first day of the month following their start date with the company. We now have around 23,000 employees in our DC scheme.

AUTO-ESCALATION

We have three tiers of contributions in the DC scheme. The lower tier offers 4% from the employee and 8% from the employer; the middle level is 5% from the employee and 9% from the employer, and then our upper tier comprises 6% from the employee and 10% from the employer. Employees can, of course, pay in more than 6% if they want, but the employer contribution is capped at 10%.

We found that we had a fairly even split between the lower and upper tiers, with a handful of members in the middle tier. However, when we applied the PLSA’s Retirement Living Standards, we realised that the 12% total contribution that employees receive in the lower tier wasn’t enough to meet the standard of living in retirement that we wanted for our employees.

We agreed that we would auto-escalate everybody who was in the lower tier into the middle tier, so that contributions between employee and employer would total 14%. All new starters would also be brought into the scheme with 14% total contributions as well.

Just as we did this, the current cost-ofliving crisis started to affect employees. We have had to be very mindful of that. Even though we were auto-escalating, we gave everybody the option to go back down to the lower tier if they wanted to.

Auto-escalation started in March 2022. Pleasingly, we had very low opt-out rates among the 9,500 or so employees who we had auto-escalated from the lower tier, with only around 50 people opting to return to the lower contribution rate. We now have about a 50/50 split between the middle and upper contributions tier. Over the last year or so since we introduced auto-escalation, the cost-of-living crisis has got worse and worse. We’ve had a trickle of people taking their contributions down to the lower tier, but it’s still only around 1% of scheme members – in fact, more people have moved from the middle tier to the upper tier than have dropped down to the lower tier.

Helping Members Engage

Over the past year, we’ve also worked hard to help members engage more with pensions. In the past, our communications have been based around traditional methods such as regular newsletters. Although we had some members who were highly engaged, many others weren’t.

Last year, we started to establish a pension contacts network, which includes around 30 employees across the various sites in the company who will act as pension contacts for colleagues. People can go to get a little guidance or help to point them in the right direction. Since then, we’ve been running training sessions with those contacts and we’re just about to roll out their names across the business in the newsletter that we’re sending out next month.

Now that it’s easier to see members face-to-face, we’re planning to take a roadshow to a number of our largest sites, which will be a combination of presentations and simply an accessible place where people can come and talk to representatives from Scottish Widows about their retirement savings plans.

Roy Brown was speaking at the PLSA’s Five Steps to Better Retirement webinar on 26 January 2023