Successfully reported this slideshow.
We use your LinkedIn profile and activity data to personalize ads and to show you more relevant ads. You can change your ad preferences anytime.

Reputation Matters: A newsletter for pension trustees


Published on

Published in: Economy & Finance, Business
  • Be the first to comment

  • Be the first to like this

Reputation Matters: A newsletter for pension trustees

  2. 2. Content Introduction 3 Managing Relationships with the Sponsor in a Bid Period 4 John Adshead, OBE Why Trustees Use PR advisers 6 Charles Amos Pension Scheme reputation management 8 Anthony Hilton Why trustees should spend (at least a little) time thinking about PR 10 Mark Cobley Communicating with pension fund members 12 Matt Gore Delivering internal communications – a case study of USS 14 MHP is a top ten UK PR company and the leading PR adviser to UK Defined Benefit pension schemes. By value MHP advises some 10% of total Defined Benefit schemes in the UK, including four of the top twenty-five schemes – USS, Royal Mail, Barclays and ICI. Formed last year from the merger of Hogarth, Penrose and Mandate, MHP topped the 2011 Reputation Online/New Media Age’s agencies league table.2
  3. 3. Welcome Nick Denton Managing Director Pension Advisory and Investor Services, MHP Welcome to the inaugural issue of Reputation Matters for Pension Trustees. This issue includes a range of contributions which we hope you will find of interest and use when considering how to manage external reputation and communications matters for your scheme.John Adshead provides guidelines on how trustees should work with sponsoring employerboards during a potential or actual bid. These are based on his own experience as Chair at JSainsbury’s pension scheme over many years including the period when Sainsbury’s faced twoputative bids in 2007.Traditionally trustees have been understandably reluctant to use the press as a platform.Charles Amos of ICI Pensions proposes that the media can, in fact, provide the best channelto ensure the trustees’ position is well understood and appreciated externally, especially in thespecific context of a takeover bid.Two journalists who know the pension field very well – both are pension trustees - have alsoproduced interesting contributions. Anthony Hilton has written one of his typically authoritativepieces on why and how trustees need to manage the reputation of their scheme in practice;while Mark Cobley of Financial News has produced a heartfelt plea for trustees to engage morewith journalists.Matt Gore of Pension Corporation looks at the best way to communicate to scheme membersduring a buy-out and how this needs to be developed beyond the basics.And there is a case study of how USS has undertaken a detailed communications plan to its285,000 members and some 400 universities and higher education institutions.We very much hope you enjoy this publication and find it useful. We aim to produce furtherissues every six months or so. Obviously we’d be delighted to hear your views and to know ifthere are specific topics you would like covered in future 3
  4. 4. Managing relationships with the sponsor in a bid period A bid period will most likely be tense and Trustees tend to operate on the basis that for frantic and it may be difficult to establish, if most of the time the interests of the company they don’t already exist, good and effective and its current and former employees relationships and channels of communication who are pension scheme members are with the sponsor when the trustees and the reasonably well aligned. A bid situation is company are under pressure and confidence one time when they may not be. It is the time and trust are stretched by the circumstances when independence of thinking, advice and of the bid. These important relationships judgement is truly critical. Good practice should already be in place - like the scouts, indicates that the trustees should have “Be Prepared”. independent support and advice. It is easy in calmer times to go along with the inherited As a matter of good governance, the situation of the company’s auditors, lawyers trustees, particularly the trustee chair, and other advisers also serving the pension should have an agreed and formal right of scheme. However, this is unlikely to work access to the senior official who can speak well when a takeover bid or merger plan has for the company on pension matters (above been launched and separate advisers should the Pensions Manager). This may be the HR be in place before a bid occurs. director or, more often these days, the CFO or the Treasurer. A key consideration for the trustees facing a bid is the potential change in the strength However, a bid makes things rather more of the sponsor’s covenant. The bidders difficult and these company officials will may be contemplating restructuring and/ almost certainly be dealing with the bid. or re-financing the business. Attempting to They may favour the proposed ownership understand fully, once a bid is launched, the change and, in any case, are likely to strengths and weaknesses of the current have different interests from those of the covenant and how it may change with new members of pension scheme - they may not owners is chancing fate for even the best even be members. The key contact on the organized and resourced trustee board. pension implications of a bid and change of Sponsors may, even in calmer times, be ownership may be between the trustees and reluctant to see trustees seeking expensive the company board through their respective outside help in understanding and analyzing chairs. It is desirable for the trustee chair to the covenant. have at least met and hopefully established a relationship with the company chair before a bid develops.4
  5. 5. “Ask us what you want to know and we for scheme members, for the company andwill tell you” may be their suggestion. And the bidders, for the Pensions Regulator andit is always a good idea to get as much if necessary for the public through the press,information as possible from the company a deep understanding of the risks to theand from published sources. security of members’ benefit that may follow a change of ownership, and what is neededHowever, it is also vital when a bid comes that to counter those risks.the trustees have, whether with outside helpor not, a well informed and well supported During a bid, trustees should be bold, decisiveview of the strength of the covenant. This will and robust in their dealings with the companybe the firm foundation for the trustees’ hard and the bidders. Communications with theheaded assessment of the bid’s implications company, the bidders and others shouldfor the pension scheme. be timely, clear and if necessary forceful in stating members’ concerns and interests. ItTrustees have few formal powers but the is easier to be purposeful, independent andbest defence of members’ interests they can robust if the independence of the trusteesoffer, whether or not specialist advisers are has been firmly established before the bidengaged, is to be able to articulate clearly arises. John Adshead, OBE Chairman of Sainsbury’s Pension Scheme 1994-2011 Chairman of Vodafone and Segro Pension Schemes 5
  6. 6. Why Trustees Use PR advisers Trustees are constantly being urged to see For most UK trustees, that employer “put their mission as like running a business but, option” is by far their most valuable single in one key respect, it’s completely different. economic asset, often underpinning one- Real businesses need contented customers third or more of total liabilities. Yet it’s the and advisers - ideally, more of them - so you one trustees have least control over. When can see why companies use PR advisers. company directors see advantages for But pension fund members are financial shareholders in radical change (takeovers, liabilities; trustees don’t need more liabilities, acquisitions, break-ups etc.), pension funds or happier liabilities, they just need to be can easily get ignored. able to discharge them. Why on earth would trustees need PR advisers? In theory, trustees might hope that the Pensions Regulator would step in; but in Maybe to protect scheme assets? Surely, practice, unless the employer is a “nice though, protecting investments is what a guy” who volunteers for Clearance or is custodian bank does, or what investment crude enough to fall foul of Moral Hazard managers do when avoiding dodgy stocks, regulations, the Regulator can disappear or what trustees do when setting asset for years into the scheme-specific funding allocation strategy or limits for individual process and may, even then, emerge with no managers? Not much need for PR advisers more cash. there, then? So a free press is often the only natural The answer, as with so much else in pensions, supporter of ordinary pension funds lies in the economics. Most UK pension members’ interests capable of responding schemes are funded on an ongoing basis, to corporate change at the speed that it which is a polite way of saying with only actually happens. Publicity can slow down around a two-thirds chance of surviving management who may be intent on ignoring without needing even more cash than trustees, particularly where transactions planned from the employer. That right to involve brand names the public recognises. call on the employer in downside scenarios Even if management is already set on doing is very valuable to pension funds (and the deal, bankers will take a hard-nosed incredibly expensive to replace); it’s called interest in anything that spells trouble ahead an unlimited downside put option. getting repaid.6
  7. 7. Foreign investors may genuinely not realisethat pension fund trustees have to putmembers’ interests first, even if managementappointed them. Yet these are complexmessages to convey in a hurry; PR adviserscan help you find journalists who understandthe subject and to explain your own fund’sposition clearly and simply in terms thatminimise the risk of being misquoted.If the regulatory system could protectmembers’ interests as quickly as capitalmarkets can sacrifice them, maybe PRadvisers would be unnecessary; but, untilthat happens, more and more trustees arelikely to use them. Charles Amos Chief Executive ICI Pension Fund Secretariat (This article first appeared in Pensions Week) 7
  8. 8. Pension Scheme reputation management Being attacked in the press is unnerving they found themselves roundly abused by for anyone but particularly so for a pension disgruntled employees and trade unions for trustee - even when they are used to press blocking a deal which could have saved their intrusion in the day job. Trustee work is jobs. technical and sometimes arcane, private, and for the most part unpaid. It is often a What this underlines is that the interests of struggle even to engage members, so it is the pension scheme can be quite different doubly a shock when interest comes from from the sponsor, and this gap can become a outside and is hostile. Trustees know better yawning chasm at times of corporate activity than to expect much thanks for what they like acquisitions or disposals. Perhaps it has do, but by the same token they don’t expect always been like that but the difference is outsiders to put the boot in without warning. that these days the trustee is expected to do And when it happens they too often find something about it. Defending the scheme themselves trapped in the headlights and members’ interests can involve taking a with no idea how to present their side of the controversial public position, often at very story. short notice. But communication is fast becoming a key This first surfaced as a public issue when requirement, at least for the chairman and David Norgrove, later the Pensions Regulator, often when it is least expected. One set of but at the time chair of the Marks & Spencer trustees were surprised to read in The Times trustees, went public with his reservations that they were being blamed for the near about a highly geared bid proposal from collapse of negotiations by their scheme rival retailer Sir Philip Green, taking a sponsor to sell an under-performing division distinctly different position from that of when in fact they were only dimly aware that the M & S board. Sainsbury trustees were talks were even underway. It turned out similarly vocal when that company came the private equity buyer was trying to force under pressure. down the price in the negotiations by leaking scare stories about the pension deficit to But the best PR is not crisis PR, and when deter rival buyers. possible it pays not to wait until the item is a headline on the ten o’clock news. Trustees The trustees thought as the story was wrong of Royal Mail understand this and have for they did not need to respond to it. This turned months been conducting a discreet press out to be a bad mistake. A few months later briefing campaign to explain what will the division was closed rather than sold and happen to the pension scheme if its past8
  9. 9. liabilities get taken over by the Government. Next time it could be different. Next time aThey believe this will put them on the front private equity house or hedge fund blows upfoot with the press – and through them with a business, someone surely will ask if it was antheir members who will read the articles - if appropriate investment for the pension fund.and when this happens. It is a lesson other The trustees will need to have an answer andlarge funds could usefully learn. one which satisfies their members as well as the media.In these cases the trustees are emerging withtheir reputation enhanced; but it is not always It is a little appreciated fact, too, that muchlike that. While it would be unfair to name of the money spent by funds on hedgingnames there are other deals, particularly interest rate and inflation risk has beenrelated to private equity acquisitions wasted - as funds were duped into believingwhere pension trustees should have been the investment banker’s model. If inflationmore vocal. They have had to endure the returns they will be much more exposeddiscomfort of being blamed for failing – at than they thought and will again face someleast in the eyes of the media – properly to probing questions.represent their members’ interests. Some ofthese could easily result in litigation. It is not the pension trustees’ fault but in today’s world people have lost faith inInvestment strategies can also bring a authority, so they want transparency, theybacklash. The struggles of the highly want answers and they are no longer preparedgeared Southern Cross care homes business to “trust the experts.” Being a trustee is nobrought a torrent of abuse down on the longer the private occupation it once was.head of Blackstone, the private equity group There are times when the credibility of thosewhich had put the business together in its responsible for the fund requires them tocurrent form. More by luck than judgement speak out in public. Doing good by stealthno one looked through Blackstone to find is no longer enough.out the identities of the investors in its fundswho were the ultimate beneficiaries of the Anthony Hiltonfinancial engineering but had they done so Financial Editor Evening Standardthey would have found several were pensionfunds. 9
  10. 10. Why trustees should spend (at least a little) time thinking about PR It’s fair to say that journalists, like me, and Traditionally, and for very good reasons, the PR people don’t always see eye-to-eye. But only public image that trustees have worried even I have to admit they sometimes have about is their image among the scheme’s their uses. own membership. Most pension schemes have no financial incentive to seek positive As a finance journalist covering pensions, publicity more widely. The trust structure as well as being a trustee myself, I also means they do not seek profits; they seek know they can be particularly useful to the the best outcome for their members. So pensions sector. pension schemes will rarely be pro-active publicity-seekers. They should certainly First, a disclaimer. This article is not never say anything to journalists that they necessarily an endorsement of any PR haven’t already told their members. agency – I wouldn’t even claim every pension fund needs one. But there are clearly occasions when the best interests of those members are served But it is an endorsement of the idea that by taking the initiative and opening up good pension scheme trustees, in today’s world, relations with the press. need to give a little thought to what we The first myth to dispel is this: if I don’t talk might call the “public image” of their pension to the press, they won’t write about me. No. scheme. Perhaps even to developing what If your pension-scheme becomes an object you might call a “media policy”. of public interest, then the press will write about you whether you like it or not. That policy can be pretty simple. It could just be: “If a journalist calls, the trustee chairman There are many trustee boards who have has the responsibility for speaking for the discovered this. Just ask the Sainsbury board”. Or perhaps it’s the company finance pension trustees, or the Boots trustees, the director, or the company press office. Or BA trustees, who are almost never out of the perhaps you do want to go all-out and hire papers these days. professional help from a PR agency. And if you don’t talk to the press, be aware: But you do need to have some procedure for someone else will. talking to the press worked out in advance. If unfair, or inaccurate stories about your And here’s why. pension scheme appear in the papers, your members might read them.10
  11. 11. Of course, there is always a right to reply. The dialogue between pension trustees andBut pension schemes don’t always make the media needs to improve. Journalists’it easy for us. I have called company press sympathy should naturally be more inclinedoffices, only to be told “we don’t comment to lie with the unpaid pension trustee andon behalf of the trustees, you need to speak the ordinary member. You should get a fairto them, and no, I can’t provide any contact hearing.details”. I have searched high and low, andleft numerous messages, only to receive And if you don’t? If you make all the righta call back from a curious administrator a preparations and take all the steps outlinedfortnight after my deadline expired. above, but you still you have a bad experience with a poor journalist who misquotes youThere are many things you can do to and doesn’t check his facts?overcome those problems. Devising a briefmedia policy is one. Providing a contact You might, understandably, decide neverpoint is another. You might spend a moment to talk to any journalists again. But theredrafting brief trustee-board statements on is a far more effective way to express yourissues you know will prove controversial, displeasure – which will punish the badand distributing them to the company press journalist as well as hopefully setting theoffice for when it announces the transaction. record straight. Talk to his rivals instead!You might even shell out for a professionalPR agency – especially if you are enteringinto a lengthy deal process that could takemonths. Mark Cobley Pensions EditorBut it doesn’t have to always be about of Financial News, a Dow Jonesavoiding the risk of bad publicity. And this publication, and abrings me to another myth that needs member-nominateddispelling: journalists are only interested in trustee of the Dow Jones UK Pensionbad news. Scheme.Of course, we are interested in bad news – it’snews. But good news can also be interesting.I have written plenty of positive articlesabout trustees’ hard work on their members’behalf, and hope to write many more. 11
  12. 12. Communicating with pension fund members Pension fund members are a diverse set of to gain and one that can be harder to retain, individuals. Even within a fund they can vary but easy to lose. hugely in class, age, education, interests and also, perhaps more importantly, in general For an insurer post-buyout, first impressions financial confidence and specific knowledge really do count. It is vital to explain what about pensions. the buyout means for members, what the transition from pension fund member to Some of the beneficiaries will not even be policyholder entails and how long it will last. the original members - they could be the Issues which should be addressed include: spouse or financial dependant of the original member. These people will possibly have had Is my pension safe? little to do with either the pension fund or Will it be reduced? sponsor and may not even remember the Will the trustees still be in place? name of the fund. Will my spouse and / or dependants still be provided for? Let’s face it: pensions can be complicated. Even amongst the active and deferred One of the key points to get across is that members of a pension fund there will be members are not dealing with a faceless many who do not understand the subject institution – that someone will be available, and some who feel they have never had either on the phone, by email or letter, to good advice. help in case of problems, and that most importantly there is someone who is Some may feel it is the responsibility of the accountable. trustees to explain everything in more depth. But best practice does not just mean sending By taking into account this lack of out letters, however well written. It might also comprehension and knowledge, trustees and mean senior members of the team speaking insurers have the opportunity to ensure that at pension fund AGMs or inviting members their communications are clear, engaging and policyholders to events put on by the and contain genuinely valuable information insurer, as we have done. in an easy-to-understand way. The benefit of communicating in this way for trustees, and We have found that about 50% of our by extension for an insurer during a pension policyholders use the internet on a insurance buyout, is that they will gain the regular basis, although very few view it as trust of their members – a difficult commodity indispensible.12
  13. 13. They use it for keeping in touch, shopping,banking and general information – very muchas do other demographics. This suggeststhat in time the internet will become a goodmeans of communicating with fund membersand it is prudent, where there are resourcesavailable, to start preparing for this, as we aredoing by developing a member log-in page onour website.Our policyholders are very clear with us – whenwe communicate with them there is a genuinedesire for help and concise information.The key points to gaining the trust of pensionfund members or policyholders are clarity,brevity and relevance, whatever the form ofcommunication. Matt Gore Chief Administration Officer Pension Corporation 13
  14. 14. CASE S Delivering internal communications Universities Superannuation Scheme (USS) Changes to the Universities Superannuation Scheme are due to take effect from October 1st 2011. This means a busy period for USS 2. Arranging regional workshops during August and September to explain the changes in benefits and identify the administrative implications – on, for example, flexible retirements. Communications Manager, Colin Busby, 3. Updating sections of the USS website and his team, who have been working on a and the scheme’s “eManual” to include detailed plan to communicate the planned amendments to any forms that are changes both to the scheme’s 285,000 affected and updates to the explanatory members and to their employers – nearly 400 notes reflecting the changes. of Britain’s universities and higher education institutions. But it was also important to identify ways to reach members directly. Embarking on such a huge and complex task required a detailed internal communications “Most members prefer face to face strategy. Colin and the team identified the communication and that’s why it’s pivotal role of the university staff who deal important to make sure institution staff with USS members on a daily basis – and are properly supported”, Busby says. who must therefore understand the planned “The USS communications team has the changes to be able to answer any questions capacity to provide on-site presentations for from eligible employees. members at the larger institutions, but this is just not practical on a large scale. Paper The strategy for informing these crucial staff communication is still the most reliable way includes: of reaching a large number of members but this can be supplemented by email with the 1. Producing a checklist of 8 important cooperation of institutions. actions that institutions must take in preparation for the scheme changes on “A significant number of members will visit 1 October 2011. The list identified the the USS website to obtain general information changes that would be required to payroll about the changes and to find out how the systems to accommodate the new rules. changes might affect them personally. A combination of the annual service statement and a new benefit modeller will answer many of their questions.”14
  15. 15. STUDYA printed summary of the changes wasenclosed with the annual service statementdispatched to institutions in June, and aPDF version of the same document wasposted on the USS website and emailed toinstitutions for distribution specifically to they are in. A new set of Q & As is also being added dealing with anticipated questions from members. Staff at the scheme’s AVC provider have also been briefed on the scheme changes, to ensure they are able to handle enquiries from scheme memberseligible employees who do not receive a on their AVC position, as have financialservice statement. advisers who participate in the arrangement USS has with the Personal Finance Society.The service statement encourages members All relevant USS printed material is beingto go to the USS website and use the benefit revised, including a new guide for membersmodeller. This tool has been re-designed and updated factsheets. Again, PDF versionsand updated to incorporate the later normal will be posted on the USS website and paperpension age (NPA) so that members can see versions will be delivered to retiring before the new NPA might affectthem. Another new modelling tool is being Finally, the Members’ Annual Reportdeveloped to illustrate the way benefits build for 2011 will be distributed to all currentup in the Career Revalued Benefits section of members in October, including deferred andthe scheme. These new tools will be available retired members, and will include a sectionbefore 1 October 2011. A programme of explaining the scheme changes.member presentations is also underwayand will be available to all institutions “Devising and implementing such a bigwith a significant USS membership. The communications project in such a short timepresentation explains the scheme changes is challenging enough”, Busby admits. “To beand how they might affect members. During doing this in the Summer, when many of theand after the presentation members have institutions and members are on holidays, isthe opportunity to ask questions. an added obstacle to overcome. The key is to use all the means of communication at ourA video explaining the scheme changes disposal, and we think this strategy puts usis being produced for the USS website. In in a good position to do just that.”addition there will be a major update of thewebsite to incorporate the changes. This willinclude new navigation to allow membersto see the benefits they are entitled todepending on which section of the scheme 15
  16. 16. MHP Communications 60 Great Portland Street London W1W 7RT 0203 128 8000 www.mhpc.comBusiness & brand experts@