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DC ConferenceThe new world of work: future proofing benefits

Thursday, 20 September 2018

© 2018 Willis Tow ers Watson. All rights reserved. Proprietary and Confidential. For Willis Tow ers Watson and Willis Tow ers Watson client use only.

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Agenda20 September 2018


Session title Speakers Outline

09.00 Welcome and introduction Amy BellWillis Towers Watson

09.05 - 09.45 The new world of work Alison Maitland, Author and Visiting Fellow at Cass Business School

Our keynote speaker will talk about future of work and the impact on employment patterns and discuss key areas that are driving change.

09.45 - 10.15 Modernising total rewards Carole HathawayWillis Towers Watson

This session will cover the key trends we see in the total rewards arena and discuss the increasing pressure on the return on investment of total rewards programmes.

10.15 - 10.35 Total rewards optimisation at American Express UK

Kathleen CyrCompensation and Benefits Director at AMEX

A case study explaining how American Express used total reward optimisation to inform benefit investment decisions and develop a three year integrated benefits roadmap. Areas of particular focus were health and wellbeing, financial awareness and how to engage a young workforce on these subjects.

10.35 - 11.00 What’s going on in the world of savings

Jayesh PatelWillis Towers Watson

Session covering our latest findings from our research studies: FTSE DC 350 Survey and Plan Design Survey. We will explore the evidence of how DC pensions fits into the wider reward package, how the delivery of pension and savings is being improved and what are the drivers for future change.

11.00 - 11.30 Coffee break11.30 - 11.50 Embed financial wellness into your

organisationRichard Sweetman and Caroline JordanWillis Towers Watson

Session looking at the topic of financial wellbeing and how it impacts the employee experience. Employers can help to improve financial wellbeing within an organisation and we will use this session to look at how a dedicated framework can be embed into the fabric of an organisation.

11.50 - 12.10 The changing face of retirement Anne Jones and Ant BirdWillis Towers Watson

Session examining how retirement has changed over the years and how it might look in the future. We will consider the choices now facing members and discuss ways that companies and trustees can help support them at this critical time.

12.10 - 12.30 DC Pension – version 2.0 Paul HerbertWillis Towers Watson

Session exploring how employers can help employees balance the competing needs of current expenditure and saving for retirement? As employees begin to rely much more on defined contributions schemes, how can they think about investment objectives in a different way in order to achieve better outcomes?

12.30 - 12.55 Interview with Santander Ian BarrettSenior Reward Director at SantanderDavid BirdWillis Towers Watson

In this session, Ian will share insight into Santander’s decision and motivations for outsourcing their pension scheme to the LifeSight master trust. They will explore the selection process, the challenges faced along the way, as well as reflecting on key learnings and the outcome for members.

12.55 - 13.00 Conference summary and close13.00 - 14.30 Lunch


Alison Maitland

Willis Towers Watson Conference, London, 20 September 2018

© Alison Maitland 2018

The new world of work


• Forces driving change• Key work trends and divides • A new model of work for the digital age• Other innovative offerings• Questions for you


What I’ll cover


Forces of change


Digitaltechnology & smart machines


Forces of change


Climatechange

Globalcompetition& disruption


Forces of change: People



• Nearly half the UK workforce• 74% of women with dependent children work• For more women to reach the top, men need more flexibility• Female executives score more highly on key skills of team

building, EI, reward and feedback, and external orientation• Gender-balanced teams solve problems better (‘collective

intelligence’)© Alison Maitland 2018

Women rising


• The ‘100-year life’• Children outnumbered by over-60s • More over-70s still working, and more over-65s self-

employed• More people returning to work after retiring• It’s not just about money … it’s about connection, purpose,

‘feeling relevant and useful’*• Potential £182bn GDP boost by raising 55-64s’ employment

rate** © Alison Maitland 2018

The end of retirement?

*NextUp survey; **PWC Golden Age Index



Millennials: a generational divide?• Job hoppers• Want to be entrepreneurs• Expect respect from day one• Crave instant feedback• Demand learning and development• Want managers as guides, not authority figures• Desire work-life fit


• Vast array of working models and arrangements• Rise of self-employed• Rise of ‘free agents’ … and of the ‘precariat’ • Around a quarter of US and EU workforce are ‘independent’• Free agents (30%), reluctants (14%), casual earners (40%),

andcash strapped (16%)*

• Inter-generational inequality – earnings, mobility & opportunities**


The real divides …

*McKinsey Global Institute; **Intergenerational Commission

willistowerswatson.com© Alison Maitland 2018

• Less hierarchy, more networks, open innovation• More democratic and transparent – smash those silos!• Variety of workspaces for different tasks• New leadership styles and practices emerging• ‘Purposeful organisations’ and ‘creative communities’

How organisations are adjusting


• Anytime anywhere, as long as objectives are met• This is the norm, not the exception• It’s business-driven, not an HR policy• Managers focus on outcomes, not hours• Leaders live it • People are empowered to perform at their best

A new model of work for the digital age

Photo: Ahmed Aqtai


Proven business benefits include:• Higher productivity• Big savings on property and

travel• Reduced carbon emissions• Faster access to new markets• Higher engagement levels• Enhanced employer reputation• Lower risk of business

disruption



But change is hard …

… and culturematters


T = Trust your peopleR = Reward outcomes, not hoursU = Understand the business caseS = Start at the topT = Treat people as individuals

From Future Work, Maitland & Thomson

Five Principles



Other innovative offerings


• Learning – and apprenticeships – available at any age • Re-skilling, focusing on human skills• Two-way mentoring schemes for mature and younger people• Mid-career breaks and ‘MOTs’• Creative time-out from the damage of work intensity


Questions for reflection today:• How do we harness digital opportunities for human enrichment,

not human loss?• Why will people work for organisations in the future?• How can benefits be tailored to the individual?• How can benefits be extended to contingent workers at all levels?• What will help individuals to plan, save and re-skill?• How do we make regular career breaks the norm?


Further information: www.alisonmaitland.com

www.futureworkbook.com

www.alisonmaitland.com

www.futureworkboo


Modernising total rewards

Carole Hathaway

© 2018 Willis Tow ers Watson. All rights reserved.

willistowerswatson.com21© 2018 Willis Tow ers Watson. All rights reserved.

THE FUTURE WAS YESTERDAY.

People have new expectations of work, and expect to be treated more like consumers.Yet organisations are facing increasing pressure to invest strategically in the right total rewards programmes to optimise cost and risk.

Those that ‘get it right’ perform better financially.


PEOPLE HAVE NEW EXPECTATIONS OF WORK, AND EXPECT TO BE TREATED MORE LIKE CONSUMERS.

People want to be treated more like consumers; they seek more choice, flexibility and personalisation in how they are rewarded and ways of working. Increasingly, people seek meaning and purpose from their work. At the same time, advancements in technology and alternative work arrangements are driving a need for new specialist skills and mind-sets. This requires a broader and more holistic focus on total rewards as part of the talent experience.


THERE IS A FINANCIAL IMPERATIVE TO MAKE THE RIGHT DECISIONS ABOUT total rewards.

Organisations are under increasing pressure to demonstrate the return on investment for total rewards programmes and manage risk. This investment measures in the hundreds to billions of dollars for most mid-to-large companies, and the scrutiny is higher than ever in the current economic and regulatory environment. HR must make strategic decisions about which total rewards programmes to prioritise, to achieve the biggest positive impact for their people and demonstrate the best value for money.


FINALLY, IT MAKES GOOD BUSINESS SENSE TO MODERNISE total rewards

To deliver your business strategy, you need a people strategy that will drive it. And there are clear links between the effective design and delivery of certain total rewards programmes and the key drivers of attraction, retention, engagement, behaviours, and financial performance. Companies with an effective total rewards approach, especially as part of a well developed talent experience, achieve better results.


So, what does modernising total rewards look like in practice? What are organisations doing to modernise their

total rewards?


We are seeing 10 themes emerging in the market with key implications for total rewards

26© 2018 Willis Tow ers Watson. All rights reserved.

Expansion of digitization of the total rewards delivery and experience

1. Future focused 2. Technology Advancements 3. Optimising cost and risk of TR

4. Segmentation 5. Consumerism and flexibility

6. Transparency

8. Wellbeing

7. Inclusion and diversity

9. Talent experience 10. Good governance

Emerging work dynamics and skills and multi-generational workforce re-write the deal

Expansion of digitization of the total rewards delivery and experience

Analytics and data measurement

More tailored total rewards with increased choice

Holistic physical, financial, social and emotional health

Expansion of worker choice and voluntary benefits

Legislative and social media increase public scrutiny

Rewards that enable an inclusive culture and diverse workforce

Emphasis on workplace differentials that enhance the environment and Talent Value Proposition

Being agile and nimble to adapt to changing, fast-moving business strategies


1. Organisations need to be more agile and FUTURE FOCUSED, to attract, develop and deploy new types of skills.


2. Organisations must respond to the impact of TECHNOLOGY ADVANCEMENTS, and embrace the opportunity for workforce insights, including segmentation and personalisation.


3. Using data and analytics to OPTIMISE THE COST AND RISK OF TOTAL REWARDS is critical to providing the insights organisations need to achieve a betterfinancial return.


4. SEGMENTATION becomes ever more important as organisations need to attract, retain and engage different types of workers and create tailored total reward packages.


5. Fundamentally, people want more choice; they want to be treated as CONSUMERS AND SEEK MORE FLEXIBILITY and personalisation in their rewards and ways of working.


6. The world is becoming more TRANSPARENT. This has important implications for how companies communicate total rewards and manage people’s perceptions of fairness.


7. INCLUSION is the key to attracting, retaining and engaging the best employees. DIVERSE skills and viewpoints drive innovation and better decisions


8. WELLBEING has become a top priority, including physical, financial, social and emotional health.


9. Organisations that align their Total Rewards strategy with their overall talent experience are more likely to achieve better outcomes.


10. Introducing BEST PRACTICE GOVERNANCE is critical to manage the changing nature of rewards and business strategies.


Look out for our latest research to be published soon!


Total Reward Optimisation (TRO) at American Express UKKathleen Cyr | Director, Compensation And BenefitsAmerican Express UK September 2018

38

American Express UK – who we are

39

6,000UK employees

Awards5

UK officelocations

38Average age in 2018

44Average age in 2010

Total Reward

OptimisationTool

Total Reward

OptimisationTool

Our benefits journey

40

PensionsPensions

Health & WellbeingHealth & Wellbeing

BenefitsBenefits

UK Pilot Market for Global Benefits FrameworkUK Pilot Market for Global Benefits Framework

3 Year Road Map

Strategy Developed

External Benchmarking

3 Year Integrated Benefits

Road Map

3 Year Integrated Benefits

Road Map

Investment Decisions

20162016 20172017

TRO identifies what employees REALLY value

41

OR

PACKAGE A PACKAGE B

Strongly Prefer Left

Strongly Prefer Right

Somewhat Prefer Left

Indifferent Somewhat Prefer Right

Pension

Annual Leave

Base Pay

Pension

Annual Leave

Base Pay

Design Alternative Impact for Money

Income Protection (80%) 3Income Protection (2/3rds) 4Private GP services at work 25 days more Annual Leave 94 Personal Development Days per year 82% increase in Base Pay 112% increase in Pension 10Dental Insurance 6Private GP services online 12 Personal Development Days per year 7

The most cost-effective ways to increase satisfaction

42

+5

+5

+6

+7

+8

+8

+8

+9

+9

+13

Baseline Satisfaction74%

How TRO informed our investment decisions

43

Introduced Group Income

Protection

ComprehensiveDental Insurance

is highly valued

No increase inCar Allowance

required

Increasing Annual Leave would be too

expensive

Technology-driven Communication

Strategy

Onsite and Virtual GP service

best impact for money

Enhanced onsite Emotional Wellbeing

support

“Nudge” technology launch for

Financial Wellbeing

Feedback on the process

46


Future of DC pensions

Jayesh Patel

20 September 2018

willistowerswatson.com© 2018 Willis Tow ers Watson. All rights reserved. Proprietary and Confidential. For Willis Tow ers Watson and Willis Tow ers Watson client use only.


DC design as part of reward


£2 m

£6 m £7 m

0

5

10

15

20

25

£5 m £4 m

£7 m

£16 m

£18 m

£22 m

0

5

10

15

20

25

Annual median contributions in FTSE 100 companies surpassed £20 millionAmong FTSE 250 a third of companies contribute more than £10 million annually

49

Share of companies with over £20m in contributions15% 15% 25% 38% 48% 55%

2009 2011 2013 2015 2017 2018

FTSE 100

Median annual contributions

FTSE 250

Share of companies with over £10m in contributions19% 38% 35%

2009 2011 2013 2015 2017 2018

Average annual contributions:

£10.5m

Median annual contributions

Average annual contributions:

£36.4m


Contribution rates have remained largely stableAverage contribution rates

50

FTSE 100

1.8% 1.7% 1.0% 1.6% 2.3%

8.6% 9.3% 9.8% 9.0% 8.7%

10.4% 11.0% 10.8% 10.6% 11.0%

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

2011 2013 2015 2017 2018

Employee core Employer core Employee match Employer match

1.9% 2.4% 2.1% 2.3% 2.5%

5.4% 5.1% 5.3% 5.5% 5.6%

3.7% 4.0% 3.9% 3.9% 3.8%

4.7%5.1% 4.8% 4.8% 4.9%

15.7%16.6% 16.1% 16.5% 16.8%

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

2011 2013 2015 2017 2018

Flat only

Flat and matched


Benefits strategy: costs control and financial well-being prioritiesHow important are the following priorities to your organisation’s benefit strategy over the next 3 years?

51

Contain benefit spend

30%

35%

33%

31%

30%

28%

Enhance benefits

Source: 2018 WTW UK Pension Strategy Survey

% Very Important or extremely important

Maintaining benefit spend at current level

Maintaining retirement spend at current level

Adding/enhancing financial well-being programmes

Increasing employee choice/flexibility regarding the benefits they can choose

Improving employee retirement adequacy

Adding/enhancing programmes to assist employees at retirement (decumulation options)



In 2 yearsTODAY

Flexibility in the use of employer pension contributions couldgrow significantly

52

Does your organisation give employees the flexibility to use the employer’s pension contributions for other financial priorities or do they have plans to do so in the future?

5,000 employees or more

1,000 to 4,999 employees

Less than 1,000 employees


38%

32%

19%

6%

11%

8%


How DC is being delivered?


Review default investment strategy

Review contributions rates/structure

Review DC vehicle (GPP, GSIPP, Master Trust, single-employer trust)

Review at-retirement options (e.g. annuity broking, drawdown)

Review at-retirement support (e.g. guidance, regulated financial advice,retirement seminars)

Over half looking to review at-retirement support

54

Has your organisation reviewed its DC provision recently, or does it have plans to do so?

32%

37%

46%

48%

54%

36%

28%

17%

28%

31%

20%

16%

8%

6%

9%

12%

19%

29%

18%

6%


Considering for next 2 years

Completed inlast 2 years

Planned in next year

Neither plannednor considering



Trust-based schemes increasingly providing at-retirement supportAt-retirement support remains largely unchanged among contract-based schemes

55

36%

79%

28%

36%

79%

25%

0% 20% 40% 60% 80% 100%

Contract-based

ANNUITY BROKING SERVICESAccess to third-party annuitybroking services

PROVIDER’SSUPPORTUse our provider’s support proposition

GUIDANCE SERVICEAccess to third-party guidance/advice service

Trust-based

79%

42%

61%

71%

41%

44%

0% 20% 40% 60% 80% 100%

2018

2017

2018

2017

2018

2017

2018

2017

2018

2017

2018

2017


Investment default funds have moved away from targeting annuitiesTrust-based schemes show more diversity

56

TARGETED WITHDRAWAL BEHAVIOURWhat type of retiree withdrawal behavior is your default fund strategy targeting at retirement?

Contract-based Trust-based

41

22.5

6

22.5

47

49

6

6

0% 20% 40% 60% 80% 100%

2017

2018

47

34

11

30

18

14

21

20

3

2

0% 20% 40% 60% 80% 100%

2017

2018

Annuity Income drawdown Short-term cash Balanced Other



Trend towards Master Trust expected to continueFTSE 250 companies more likely to be reviewing own-trust arrangements

57

FTSE 100

45 478

42

45

13

40

45

15 63 298

6322

15

61 19

20

FTSE 250

2018 2017 2015 2018 2017 2015

Contract-based Trust-based Master Trust


Trend towards Master Trust expected to continue

58

Current and expected form of the organisation’s main DC pension scheme

Collective DCOccupational money purchaseMaster TrustGroup SIPPGPP or Stakeholder plan

1,000 to 5,000 employees More than 5,000 employees

47% 44%

3% 2%8%

29%

42%24%

2%

Today In 3 years

33% 28%

7%4%

22% 41%

39%26%

Today In 3 years


Optimising your DC Plan


Desire to enhance communication and engagement for members

Desire to improve member retirement outcomes

To integrate pension into a wider financial well-being programme

To modernise pension delivery vehicle

To manage company costs

Too much regulatory change and governance requirements

Improving communications and engagement for members is the main motivation for reviewing the pension vehicle

60

What are the drivers that lead to/are leading your organisation to review their DC pension vehicle?Please select up to three options

68%

60%

31%

29%

28%

23%



How can you optimise the delivery of your DC pension plan?Setting out your long term vision for your DC plan to align with broader reward strategy

61


Embed financial wellness into your organisationRichard Sweetman & Caroline Jordan


willistowerswatson.com© 2018 Willis Tow ers Watson. All rights reserved. Proprietary and Confidential. For Willis Tow ers Watson and Willis Tow ers Watson client use only.

SITUATION OPPORTUNITIES BARRIERS

63


Over one third of UK households have no significant savings

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4 out of 10 UK employees have gone through at least one

significant financial event during the past 2 yearsNote: “Don’t know” and “Prefer no to answer” questions were removed for the calculationsSource: 2017 Global Benefits Attitudes Survey, United Kingdom

Live pay check to pay checkStrongly agree

or agree

35%

Lack of financial resilienceCould certainly not or

probably not

41%

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FinancialEmotional

Social

Wellbeing4 million are in financial difficulty and are therefore at greater risk of developing poor mental health as a result.Mental Health UK

A critical component of overall wellbeing

Physical


Where do you want to be?

Cure Prevention

Leading Complying

willistowerswatson.com67

Our approach


WellnessSystem

Vision Listen

Design

Enable

Measure


The best wellbeing strategies have employees at the heart

Wellbeing


Thank you

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Historical Retirement

72

Which provides a spouses’ pension

With a known & guaranteed

regular income

That increases at least in line with

inflation (RPI)

Stop working between age

60 and 65

Tax-freecash upfront

And certain other Scheme specific

guarantees


Current ‘Retirement’

73

Annuity

Drawdown

Cash Tax

State Pension

Reduced hours

1.2m 5 years

25%

75%

15%

30%

55%


Build the retirement journey

74

1 2 3

Understand yourmembers

What options do youwant to offer?

What support domembers need?


Communication: focus on NEED, not product

75

The peace of mind of a guaranteed,

regular income

Something for myspouse / partner

Short-term income forhealth reasons

Leaving somethingfor my kids

Cash to clear debt /the mortgage

Take what I needwhen I need it

Pay as little taxas possible

The value goes up each year so I can continue to buy the

things I need


2025

Communication: Explaining the complex visually and meaningfully

76

2005 2015 2035

£1.51 £2.05 £2.59 £3.13

70p £1.16 £1.62 £2.08

34p 42p 50p 58p


Giving members the support they need

77


Meet Todd



Redefinethe GOAL


Rethinking risk budgeting


Early working life Later working life Retirement

Ris

k

Not understanding the member’s liability Investment riskInflation risk Interest rate riskLongevity risk Contribution risk

Outliving incomeInsufficientcontribution

Insufficientgrowth

Cost of converting

accumulatedfunds into

(real) income

Erosion ofpurchasing power

of income

Idiosyncraticincome needs


Investment return potential


CONTRIBUTION RETIREMENT


Management strategies


Risk

Strategies

Invest (hedge) Invest (diversify) Insure Influence Ignore

Conversion to income –interest rates üü ü ü ü ?Outliving income – longevity û û üü ü ü

Purchasing power erosion –inflation üü ü ü ü üû

Income needs – uncertainty û û ? ü ?Contributions – insufficient û ? û ü ?


Moving forward


Where most plansare now

Best practice given current constraints Aspirational

DC2.0:Post-retirement

income provision vehicle

DC3.0:Integrated whole-

of-life wealth management

vehicle

DC1.0:Tax efficient

workplace savings vehicle

dc conference - willis towers watson · survey. we will explore the evidence of how dc pensions...

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