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. 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 employer
boards during a potential or actual bid. These are based on his own experience as Chair at J
Sainsbury’s pension scheme over many years including the period when Sainsbury’s faced two
putative 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 channel
to ensure the trustees’ position is well understood and appreciated externally, especially in the
specific context of a takeover bid.
Two journalists who know the pension field very well – both are pension trustees - have also
produced interesting contributions. Anthony Hilton has written one of his typically authoritative
pieces 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 more
with journalists.
Matt Gore of Pension Corporation looks at the best way to communicate to scheme members
during 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 its
285,000 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 further
issues every six months or so. Obviously we’d be delighted to hear your views and to know if
there are specific topics you would like covered in future issues.
nick.denton@mhpc.com
3
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. “Ask us what you want to know and we for scheme members, for the company and
will tell you” may be their suggestion. And the bidders, for the Pensions Regulator and
it 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 the
and from published sources. security of members’ benefit that may follow
a change of ownership, and what is needed
However, it is also vital when a bid comes that to counter those risks.
the trustees have, whether with outside help
or not, a well informed and well supported During a bid, trustees should be bold, decisive
view of the strength of the covenant. This will and robust in their dealings with the company
be the firm foundation for the trustees’ hard and the bidders. Communications with the
headed assessment of the bid’s implications company, the bidders and others should
for the pension scheme. be timely, clear and if necessary forceful in
stating members’ concerns and interests. It
Trustees have few formal powers but the is easier to be purposeful, independent and
best defence of members’ interests they can robust if the independence of the trustees
offer, whether or not specialist advisers are has been firmly established before the bid
engaged, 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. 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. Foreign investors may genuinely not realise
that pension fund trustees have to put
members’ interests first, even if management
appointed them. Yet these are complex
messages to convey in a hurry; PR advisers
can help you find journalists who understand
the subject and to explain your own fund’s
position clearly and simply in terms that
minimise the risk of being misquoted.
If the regulatory system could protect
members’ interests as quickly as capital
markets can sacrifice them, maybe PR
advisers would be unnecessary; but, until
that happens, more and more trustees are
likely to use them.
Charles Amos
Chief Executive ICI Pension Fund Secretariat
(This article first appeared in Pensions Week)
7
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 past
8
9. liabilities get taken over by the Government. Next time it could be different. Next time a
They believe this will put them on the front private equity house or hedge fund blows up
foot with the press – and through them with a business, someone surely will ask if it was an
their 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 and
large funds could usefully learn. one which satisfies their members as well as
the media.
In these cases the trustees are emerging with
their reputation enhanced; but it is not always It is a little appreciated fact, too, that much
like that. While it would be unfair to name of the money spent by funds on hedging
names there are other deals, particularly interest rate and inflation risk has been
related to private equity acquisitions wasted - as funds were duped into believing
where pension trustees should have been the investment banker’s model. If inflation
more vocal. They have had to endure the returns they will be much more exposed
discomfort of being blamed for failing – at than they thought and will again face some
least in the eyes of the media – properly to probing questions.
represent their members’ interests. Some of
these could easily result in litigation. It is not the pension trustees’ fault but
in today’s world people have lost faith in
Investment strategies can also bring a authority, so they want transparency, they
backlash. The struggles of the highly want answers and they are no longer prepared
geared Southern Cross care homes business to “trust the experts.” Being a trustee is no
brought 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 those
which had put the business together in its responsible for the fund requires them to
current form. More by luck than judgement speak out in public. Doing good by stealth
no one looked through Blackstone to find is no longer enough.
out the identities of the investors in its funds
who were the ultimate beneficiaries of the Anthony Hilton
financial engineering but had they done so Financial Editor
Evening Standard
they would have found several were pension
funds.
9
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. Of course, there is always a right to reply. The dialogue between pension trustees and
But 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 inclined
offices, only to be told “we don’t comment to lie with the unpaid pension trustee and
on behalf of the trustees, you need to speak the ordinary member. You should get a fair
to them, and no, I can’t provide any contact hearing.
details”. I have searched high and low, and
left numerous messages, only to receive And if you don’t? If you make all the right
a call back from a curious administrator a preparations and take all the steps outlined
fortnight after my deadline expired. above, but you still you have a bad experience
with a poor journalist who misquotes you
There are many things you can do to and doesn’t check his facts?
overcome those problems. Devising a brief
media policy is one. Providing a contact You might, understandably, decide never
point is another. You might spend a moment to talk to any journalists again. But there
drafting brief trustee-board statements on is a far more effective way to express your
issues you know will prove controversial, displeasure – which will punish the bad
and distributing them to the company press journalist as well as hopefully setting the
office for when it announces the transaction. record straight. Talk to his rivals instead!
You might even shell out for a professional
PR agency – especially if you are entering
into a lengthy deal process that could take
months.
Mark Cobley
Pensions Editor
But it doesn’t have to always be about of Financial News,
a Dow Jones
avoiding the risk of bad publicity. And this
publication, and a
brings me to another myth that needs member-nominated
dispelling: journalists are only interested in trustee of the Dow
Jones UK Pension
bad news. Scheme.
Of course, we are interested in bad news – it’s
news. But good news can also be interesting.
I have written plenty of positive articles
about trustees’ hard work on their members’
behalf, and hope to write many more.
11
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. They use it for keeping in touch, shopping,
banking and general information – very much
as do other demographics. This suggests
that in time the internet will become a good
means of communicating with fund members
and it is prudent, where there are resources
available, to start preparing for this, as we are
doing by developing a member log-in page on
our website.
Our policyholders are very clear with us – when
we communicate with them there is a genuine
desire for help and concise information.
The key points to gaining the trust of pension
fund members or policyholders are clarity,
brevity and relevance, whatever the form of
communication.
Matt Gore
Chief Administration Officer
Pension Corporation
13
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. STUDY
A printed summary of the changes was
enclosed with the annual service statement
dispatched to institutions in June, and a
PDF version of the same document was
posted on the USS website and emailed to
institutions 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 members
eligible employees who do not receive a on their AVC position, as have financial
service 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 being
to go to the USS website and use the benefit revised, including a new guide for members
modeller. This tool has been re-designed and updated factsheets. Again, PDF versions
and updated to incorporate the later normal will be posted on the USS website and paper
pension age (NPA) so that members can see versions will be delivered to institutions.
how retiring before the new NPA might affect
them. Another new modelling tool is being Finally, the Members’ Annual Report
developed to illustrate the way benefits build for 2011 will be distributed to all current
up in the Career Revalued Benefits section of members in October, including deferred and
the scheme. These new tools will be available retired members, and will include a section
before 1 October 2011. A programme of explaining the scheme changes.
member presentations is also underway
and will be available to all institutions “Devising and implementing such a big
with a significant USS membership. The communications project in such a short time
presentation explains the scheme changes is challenging enough”, Busby admits. “To be
and how they might affect members. During doing this in the Summer, when many of the
and after the presentation members have institutions and members are on holidays, is
the opportunity to ask questions. an added obstacle to overcome. The key is to
use all the means of communication at our
A video explaining the scheme changes disposal, and we think this strategy puts us
is being produced for the USS website. In in a good position to do just that.”
addition there will be a major update of the
website to incorporate the changes. This will
include new navigation to allow members
to see the benefits they are entitled to
depending on which section of the scheme
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16. MHP Communications
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London
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0203 128 8000
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