Communicating effectively with DB members and trustees is key for mitigating risk—and this is especially true for communicating critical changes, such as the decision to close a DB plan.
The main thing DB plan sponsors need to understand when they communicate the different details of the DB plan is that they have “the curse of knowledge”—meaning, the information they know about the plan isn’t necessarily known to plan members, said Peter Nicholas, CEO of Anthony Hodges Consulting, speaking at Benefits Canada’s 2015 Benefits and Pension Summit.
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In fact, “ a lot of people, when you ask them about their pension, they don’t know,” Nicholas said, explaining that many members may not be aware what kind of DB plan they have and what its investment strategy is.
DB sponsors also need to know their audience well, keeping in mind that a lot of plan members may not find numbers easy to understand. “Pictures are going to be far more successful than Excel spreadsheets and numbers,” Nicholas said.
Using videos is also an effective way to convey a message, especially since most members have smart phones. “In the digital age, people are reading less and less,” he said.
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And, when you do ask members to read, toss the jargon, Nicholas advised. “A lot of the communications we have is in a language they can’t understand.”
It’s also crucial to segment plan members in different groups and personalize the information for each group, excluding any details that may be irrelevant, Nicholas explained.
Finally, he said, it’s crucial for DB sponsors to monitor and measure their communications strategy, just like they monitor their investment strategy.
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When plan sponsors communicate important decisions, it’s key to “do it right the first time,” said Geoff McKenzie, head of global pensions and benefits at Vodafone, speaking at the same event.
It’s a lesson McKenzie learned a few years ago when Vodafone, the second biggest telecom in the world, decided to close its DB plan.
“The DB scheme was becoming a significant cost to the company. The deficit was increasing irrespective of investment returns,” McKenzie said. At the time, about 40% of the company’s U.K. employees belonged to the DB plan.
The company deployed a full-fledged communication campaign which included newsletters and a special website explaining the changes.
“That was nine months of my life I don’t want to have again,” McKenzie said, explaining that the communication campaign took up a lot of management time.
All the articles from the event can be found in our special section: 2015 Benefits & Pension Summit Coverage.