Lessons from Murray: do you have a pension strategy?
28 Jul 2017 - Estimated reading time: 3 minutes
My colleague Christine and I were reflecting on Andy Murray’s recent knock out from Wimbledon and some of his comments on the event, like “it’s not all strawberries and cream”, and “it’s about managing your body and your training as best as you can so that when the time comes you’re as ready as possible to perform at the highest level”. Andy is not known for his earth shattering quotes, but he is known for getting to the point and he has a point here. The simplicity of what he was saying really struck me as I am aware from a recent number of pensions events how very few finance directors or reward directors have a pensions strategy in place to support the delivery of their business objectives. From my experience having a clear strategy helps companies perform at the highest level, deliver cost certainty and ensure they are well prepared to cope with what the future brings.
For a few years I have been working with a new client advising on their DC pension arrangement. Together we were reflecting on the decisions taken since appointment and it really hit home the power of having a good strategy in place. The pension scheme is improving member outcomes at a pace that is affordable for the company. We have a strong message for all members about what the pension scheme aims to deliver and as a group, we have clear priorities to achieve and the company has a firm handle on costs. Every time we have been thrown a legislative ‘curve ball’ we have been able to consider it in the context of, ‘how does that align with our strategy?’ so decision making has been like ‘returning an easy serve’. Everyone has a real sense of satisfaction as we have been able to achieve a lot in a short space of time.
Christine noted that it is similar when working with DB schemes where trustees and employers are seeking to manage their deficits. Her approach is to help clients set a clear direction of travel with carefully placed milestones. From Christine’s experience, agreeing clear objectives upfront between all of the parties and keeping your eye on the ball in every decision that follows, creates the focus for trustees and employers to make the best decisions for their members. This saves time and money and ultimately helps to safeguard members’ benefits. She highlighted her experience with a client who she worked with to identify the long term objective of buying out benefits with an insurance company. With this clear objective in mind, rather than retaining risk and relying on equity market growth and yield reversion, the client was able to take less risk and pay lower contributions for longer. As the ‘match progressed’ they were able to identify and capitalise on the right opportunities, in this case, securing a buy-in for their pensioner population at an attractive price.
I like to imagine that our approach to setting a pension strategy is not too different from preparing a plan for a successful career as an athlete. Firstly, get all the interested parties together to explore and define success. Consider this in the context of your competitors, your market, your beliefs, what you can control and how it aligns with company aspirations. From there, set some clear and measurable objectives to deliver success and review them each time you tick a tournament off your list. Game, set and match!?!