Pensions education can prove a difficult task

Communicating complex financial scenarios around retirement and pensions can be mired with problems, but Kate Donovan finds out from BP’s Susan Hughes how to simplify messages to hook-in the widest audience

The subject of pensions is often perceived to be as dry as the desert. So getting employees to understand the value of investing in company pension schemes can be a daunting prospect, especially when negative media coverage around pensions may have put staff off. With 16,900 UK employees under her wing, Susan Hughes, manager of UK pensions policy at BP, has had to master financial education at the highest level.

Despite the government’s intention to set up a national financial education service as part of a series of measures that are designed to help workers understand pensions and the need to save more for retirement, Hughes believes that it makes business sense for employers to also educate staff about company schemes.

"[As] an employer, if you’ve got a pension scheme, it’s a very valuable benefit. You are foolish if you don’t communicate what that benefit is to your employees, you’re losing out on the kudos of providing that benefit," she adds.

The task at BP is particularly complex due to the diverse workforce and the range of pensions options. Staff are still able to join the final salary BP Pension Scheme into which approximately 90% are currently enrolled. It automatically provides employees with a pension based on a 60th of their earnings for each year that they are a member. Although the scheme does not require the employee to make contributions, they can opt to do so.

An array of scenarios
The company also has another final salary scheme called the BP Gas Scheme and a defined contribution (DC) plan called BP Retailing for its forecourt staff.

It also has the Burmah Castrol fund, which is a final salary plan that BP adopted when it bought Burmah Castrol in 2000, which has now been closed to new joiners. Historically, the pension plans of any newly acquired companies, such as Amoco and Arco, have been brought under the umbrella of the overall BP pension fund. Employees that have moved across as part of the deals have been able to join the BP Pension Scheme for future service.

Hughes explains the enormity of the communication task she undertakes. "Because we are a long-standing company, we’ve got 30-odd other sections within the [overall] fund but they are not open to new employees, they’ve got pension defers in there. However, it’s important for us to bear this in mind when we are delivering communications to people," she says.

Not only does Hughes have to consider staff who have retired or moved on in her financial education plans, she has to also has to decide how best to target the existing employees who work in different parts of the business whether in retail, off-shore, overseas or as tanker drivers.

In light of such complexity, Hughes believes it is hard for employers to provide individual financial advice. "Every individual will have their different needs and because of this, it’s difficult to provide meaningful financial advice tailored to each individual employee. I think the ideal way for the employer to do that is to provide good generic advice so that employees can understand the general basic principles. This way, employers are giving those people the tools and the contacts and the links in order to take it forward to suit their own individual scenario."

By making this type of broad financial education available, the employer can help ensure employees are on the right track. Hughes believes it is then the employee’s responsibility to use that education and seek financial advice for their specific circumstances. "It’s a partnership approach with the individual. The individual has got to take responsibility,"she says.

However, where regulatory changes are introduced a responsible employer should be prepared to educate the workforce about them. When the pensions simplification and age discrimination legislation were introduced last year BP stepped up its financial education a gear, although only around 300 of the organisation’s most senior employees were affected by the new pensions rules.

"I think when you are making changes, as we did last year, you are duty-bound to communicate those changes and make it clear to the users, not least the in pensions environment where you are legally obliged to consult with employees [in certain cases]."

As an employer, it can be difficult to ensure that the financial education is being communicated effectively, especially when the workforce is vast.

Hughes is a firm believer in the use of providing information online. BP’s site Pension Line incorporates a pension modelling tool.

"[An] employee can go in with pass-worded access and it’s got all their data – name, date-of-birth, salary, and [they] can do calculations based on various different retirement [factors]." She says that this personal element encourages employees to take ownership of their pensions, but is first to admit the website alone is not sufficient to get across key messages. "Our philosophy is that the website doesn’t replace verbal interaction, it’s there as support."

Aware of the importance of human interaction, BP also runs reward rooms where internal personnel representing different reward elements such as pensions, company share schemes and cars are on-hand to answer employee questions on a one-to-one basis.

Live presentations delivered to groups of employees, sometimes by video or just audio, have also proved a popular technique, particularly in ensuring education is communicated across the workforce. The website is also key in targeting employees wherever they are based.

"The Pension Line website can [be accessed] from anywhere, from home or from an internet cafª. You might have a tanker driver who doesn’t actually have a desk, they can do it at home on their PC, but if they haven’t got one, then you risk cutting people out from having that information. So, we have to think through who we are communicating to and what’s the most appropriate way to do it."

In the case of offshore staff and its expatriate contingent, for instance, BP uses methods such as CD-Rom mail-outs and the BP employee newsletter.

Hughes welcomes any proposals that will help get more staff interested in pensions and therefore supports the government’s plan to introduce personal accounts and automatic enrolment in 2012. "I think there is a recognition out there that there’s a huge amount of the working population that have no pension provision and it’s an opportunity to get them into it. I think that the intent and goodwill is there."

She also recognises the potentially positive impact of auto-enrolment after facing her own frustrations on the retail arm of BP where staff turnover is particularly high and encouraging staff to take-up the DC scheme is difficult. "Once they are in, unless they desperately don’t want to or can’t afford it [they are likely to stay in], because they’ve actually got to do something to get themselves out of it," she says.

Hughes has already taken measures to improve the take up of DC scheme. "We have recently revamped the communications. They actually have something like 20 different options for investment, which personally I think is high, so we did look to improve the understanding."

BP has also launched new benefits statements, which employees can access through the website or in a paper format. "We are conscious that we have a very good package but it’s a complicated package and the challenge is to make sure individuals understand [it]," she explains.

There are also plans to develop a more integrated approach to communicating reward and delivering financial education via a national programme for staff that includes generic advice and debt counselling.

Career history

  • Susan Hughes joined Abbey National in 1984 as a graduate and was assigned to the in-house pensions team.
  • She then moved to ITN in 1989 and was pensions manager for nine years.
  • Hughes then took on the role of pensions policy adviser in BP’s pensions policy department. She then became manager of the company’s subsidiary pension scheme and has been manager of UK pensions policy about 18 months.


  • A survey of UK adults led by the Financial Services Authority, Financial capability: establishing a baseline, carried out in March 2006 found the following
  • 81% of respondents did not think a state pension would provide the standard of living they had hoped for in retirement, but 37% had not made additional provision.
  • Of those who had not made additional provision, only 28% blame lack of income, while 26% claimed they had not thought about pensions or had not got around to saving.
  • Only 42% of the pre-retired have a current personal or occupational pension, with 28% having a pension they have paid into in the past.
  • Some 42% of respondents agreed with the statement: "I would rather have a good standard of living today than plan for retirement."
  • Two-fifths of those sureyed agreed with the statement: "I tend to live for today and let tomorrow take care of itself."