21 Apr 2017

Case study: How Nationwide used technology to access pension scheme data and boost retirement saving

As the world’s largest building society, saving for the future is our business, so it won’t come as a surprise to hear that at Nationwide we are committed to helping our employees save for a comfortable retirement.

That’s why we offer a generous core employer contribution of 13% with a core employee contribution of 4% and an extra 3% in matching additional contributions to all our DC scheme members from the day they start working at Nationwide. Therefore, if an employee takes full advantage of the benefit, they can potentially boost their pension saving to a 23% contribution rate each month.

We knew that only 9% of scheme members were taking advantage of matched additional contributions by paying more than the minimum 4% in employee contributions, but despite this, using financial modelling technology (Hymans Robertson’s Guided Outcomes (GO) analytics), data showed that 70% of our members were on target to achieve a comfortable retirement income.

While we were pleased to see a relatively high percentage of employees were on target, we wanted to implement a new strategy that would increase that percentage and encourage employees to pay more to get more and take ownership of their retirement saving.

Again, using GO analytics data, we discovered that if all members took advantage of matched contributions and paid 7% employee contributions, we could boost the percentage of those on target to retire comfortably to 85%.

The data that GO allowed us to access enabled us to quantify the impact that encouraging employees to take advantage of matched contributions could have, and supported our decision to change our approach radically.

Defaulting members in at highest matching contribution

The new approach was to default members in at the highest matching contribution – so a 7% employee contribution resulted in a combined 23%. Members can then reduce contributions back down to the minimum (and give up employer match) if they want to, but they have to engage during their flexible benefits window to dial down the contributions they pay.

Also, taking inspiration from auto-enrolment rules, we reset the contribution levels each year, meaning members who want to save less have to review and adjust their contribution rate annually.

A ten-fold increase

The impact on the scheme’s member saving has been phenomenal. There has been an immediate ten-fold increase in the percentage of members paying more than the core 4% contribution, and 18 months on since we implemented the change, 84% of members are making additional contributions – up from the 9% before the changes were made.

Obviously the change was not overnight, raising contributions without explanation would have caused a negative reaction. So before defaulting contributions to 7%, we laid a foundation by raising employees’ general awareness of pensions.

This involved running team briefings and competitions about the value of pensions and getting people to engage with retirement saving emotionally. The team also commissioned a short, animated video that communicated the value of contributions and making the most of matched contributions.

Using technology to access scheme data has been a very useful to the pension team at Nationwide. We know that the more people that take advantage of matched contributions the better, but using GO analytics has enabled us to quantify the impact and given us solid data to measure exactly how many of our members are on course for a comfortable retirement.

This means we can continually monitor and adapt our strategy to try and get that overall percentage of members on course to for a comfortable retirement as close to 100% as possible.

Ian Baines is head of pensions at Nationwide.

This article was provided by Hymans Robertson.