Auto-enrolment Case Study

24 October 2012 Carol Young – HEINEKEN in the UK Pensions Manager

Some background

• • • Carol Young Pensions Manager HEINEKEN in the UK DC Plan: launched in July 2011 c. 2,100 active members DB Plan: c. 41,000 members £2.4bn assets • • • • • • HEINEKEN in the UK UK’s leading beer & cider producer Heineken®, Foster’s, Strongbow, Bulmers, John Smith’s, Kronenbourg 1664 c2,100 employees across 7 main sites 1.2bn litres of beer and cider p.a. Managing 1,200 UK pubs 3 separate payrolls

Outline

• • • • • • • The pensions challenge at HEINEKEN in the UK Our aims and principles How we engaged employees Launching our DC plan Outcomes so far Steps remaining Learning

The pensions challenge

2008: Heineken acquired Scottish & Newcastle Existing DB Scheme c. 42,000 members c. 2,300 actives £50m accelerated contributions 2009 £570m Deficit 2012 £1bn Deficit?

Recovery Plan Up to £61m p.a. additional employer contribs.

An unsustainable risk to our business To do nothing was not an option!

Your aims and drivers may well be different but an insight into our journey might still help in your planning

HEINEKEN’s aims and principles

A “must do” business project Not an HR project Top level buy-in & active involvement Requiring a solution that was:  Sustainable    Competitive in the market place Centred on informed choice “Future Proofed” for Automatic Enrolment Engagement Comprehensive and 2-way Colleagues Representatives HR Managers

Engagement

Realistic and measureable communication objectives: • • • Understand Why Heineken is doing this How it will affect me How do I get further information/support Accept • • • Short term: Change is inevitable but Company support remains Approach is well considered New DC is a quality scheme and flexible • • Medium/longer term: New DC is valuable, fair and well governed The need to take responsibility for own retirement plans Critical for meaningful engagement Underpin all subsequent activities

Planning & engagement to launch

Gradual build, multiple iterations and follow-through support Q2 2010 Q3 Q4 Budget Setting & Provider Selection Holding Position & Building Awareness Q1 2011 Q2 Q3 Organisational Readiness Formal Consultation Education & Sign-up DC LAUNCH Understanding Ongoing support Acceptance

Engagement: your provider can help

Multiple channels: in workplace and at home PLUS face to face What will work best for your members?

Outcomes: Launch Group

Take-up 94.4% 50 The overall take up rate Only 50 colleagues from our DB  to join DC group chose not Contribution choices <15% Opted for lowest initial contribution >70% Started at highest contribution level or are tracking towards it Investment choices Only 52 >11% The Rest Colleagues defaulted to Balanced Lifestyle (didn’t tick anything) Chose core fund or full fund range Made an active choice across 3 lifestyle profiles

Enrolling our population post launch

• • • • No complacency!

Enrolled automatically through offer letter and Contract of Employment flyer – explains default options and how to make changes Take up still high but we have to keep working at it….

…less evidence of active engagement with details – more default decisions than for launch population • • • • Pensions training at new start induction courses Where employee “opts out” the pensions team issues a letter reminding of benefits given up All information available via our HR Portal Remind colleagues of providers support and information available online and by phone 10

Colleagues’ views

“There was a lot to take in but it helped me make a positive decision about my future pension.”

Production colleague, Hereford

“The company came across as open and keen to explain the facts as clearly as possible.”

Sales colleague, Edinburgh

“For the first time I feel I understand the basics about pensions. It’s not always good news, but now I feel able to start planning for my own future.”

Contact Centre colleague, Livingston

Steps remaining to staging date

We have a great base but there’s still work to do!

Q2 2012 Q3 Q4 Payroll vs. provider solution?

Design & agree detailed processes & governance Q1 2013 Q2 Organisational readiness incl/comms Annual renewal Final testing Q3 HUK Staging Date Preparation Review Go Live

Learning

Next Effective 2-way communications key to building member engagement and confidence Buy-in from the very top Taking the time agreed objectives coupled to the right project structure to build real understanding – crucial to informed choice Payroll set up is key to success start preparing early – will be a business wide project