EQ Magazine Summer 2014

ENGAGE, INNOVATE, DELIVER.

LONGEVITY TIMEBOMB P24 Ageing and equality campaigner Baroness Greengross urges later retirement

OPEN ALL HOURS P22 The rise of anytime enrolment benefits THE ART OF SMART P34 Managing data with artificial intelligence THE END IS NIGH P32 The imminent demise of contracting-out

Make the Difference

Secret Millionaire Gordon McAlpine on sales skills, standing out and sharing success

ALSO INSIDE The future of annuities // Big data, big impact // Six steps to mutualisation

FOREWORD

WORDS FROM THE FRONT

A time for change

6

of the best

CROWDSOURCING

Lisa Labarte, Editor

You will notice that a lot has changed in this edition of EQ. There are still the same high-quality articles, but now there is even more great content, covering a broader range of the issues facing your business.

Big brands are realising that there is power in numbers and are looking to the crowd for sparks of inspiration

Undoubtedly, it’s been a huge year for pensions. With this in mind we take a closer look at what this means for pension taxation limits on page 15. Finally, there has been a bit of respite for savers. We’ll be talking more about this on page 9 where we take a closer look at the NISA. Outsourcing is still a hot topic. We get a handle on mutualisation with our six-step guide on page 28 and find out more about how artifical intelligence can help you to manage information overload on page 34.

In our cover feature, Gordon McAlpine tells us more about The Sales Club and Baroness Greengross discusses the challenges of an ageing population on page 24.

Please contact me at: marketing@ equiniti.com

I hope you enjoy this improved edition of EQ and please do send us your feedback.

The Equiniti Group: The following companies are registered in England and Wales. Registered Office: Aspect House, Spencer Road, Lancing, West Sussex, BN99 6DA: Equiniti Limited, no: 6226088; Equiniti Financial Services Limited, no: 6208699. Registered office: Sutherland House, Russell Way, Crawley, West Sussex, RH10 1UH: Equiniti Services Limited, no: 756582; Claybrook Computing Limited, trading as Equiniti Claybrook, no: 1287205; Paymaster (1836) Limited, trading as Equiniti Paymaster and Hazell Carr, no: 3249700; Equiniti Solutions Limited, trading as Equiniti Paymaster and Hazell Carr, no: 3335560. While every effort has been made to ensure that information is correct at the time of going to print, The Equiniti Group cannot be held responsible for the outcome of any action based on information contained in this publication. The Equiniti Group does not give any warranty for the completeness or accuracy for this publication’s content.

EQ magazine is produced and published on behalf of Equiniti by White Light Media.

Creative Director: Eric Campbell Writers: White Light Media team, Lisa Labarte, Nicola Collins Designers: Eric Campbell and Matt McArthur www.whitelightmedia.co.uk Members of the CMA & PPA

2 > EQ | summer 2014

EQ magazine has been printed on environmentally responsible paper, manufactured using 50% recycled waste and 50% fibre from well-managed forests, controlled sources and recycled wood.

1

Netflix

Netflix challenged its developers to come up with a better recommendation engine for its customers back in 2006. The Netflix Prize aimed to improve the accuracy of predicting how much a customer would enjoy a movie based on their movie preferences. $1 million was up for grabs, with the competition expected to last until 2011. But it was cut short in 2009 when the team BellKor’s Pragmatic Chaos claimed the prize with its outstanding algorithm.

2 Starbucks

Even the world’s biggest brands need a little help now and again. Starbucks’ crowdsourcing platform, My Starbucks Idea, lets coffee drinkers share their opinions on products, the in-store experience and the chain’s community and social responsibility.

Ideas such as having Starbucks on university campuses, getting a free drink when purchasing a mug and Starbucks evening stores have been introduced as a result.

CONTENTS INSIDE THIS ISSUE

EQUINITI MAGAZINE NUMBER 12 Cover photograph

by Anthony Upton

3

Dell

What better way to find out what your customers want than to interact with them directly? With that in mind, Dell launched IdeaStorm so customers can collaborate with each other and the tech giant. From the thousands of ideas that have been generated Dell has implemented more than 500 of them, including innovative backlit keyboards and biodegradable packing material.

4

LEGO

LEGO’s crowdsourcing platform, CUUSOO, is one for your inner child. People can submit product concepts via its site, and if a project gains 10,000 supporters, it is reviewed by LEGO’s designers with the chance of being put into production. If it’s successful, the brains behind it will receive 1% of the total net sales. A Ghostbusters 30th Anniversary set was a recent addition from CUUSOO to the LEGO family.

5

PepsiCo

In 2010, the Pepsi Refresh Project awarded $20 million in grants to individuals, businesses and non-profit organisations who put forward ideas to help their local community. The company has also used its ‘Do us a flavour’ campaign across its different markets, asking fans to come up with new flavours for the brand’s Lay’s potato crisps (or Walkers in the UK).

6 Fiat

The world’s first crowdsourced car became a reality in 2010 when Fiat Brazil unveiled its futuristic concept car, the Fiat Mio. People were invited to create a car for the future and more than 11,000 ideas were submitted. Fiat interpreted and worked the ideas into the car’s design, and the Mio’s final specifications were made available to everyone, including other car manufacturers.

FEATURES 4 United we stand

Preventing further eurozone debt crises

7 Saving is a lot NISA

The NISA spells good news for savers

8 The Sales Club

Secret Millionaire Gordon McAlpine knows how to maximise potential

13 A higher price to pay

25 Choosing the sunnier option

Equiniti Paymaster gets overseas pensioners their money without hefty charges

26 Six steps

How to manage a successful mutualisation

28 A ticking time bomb

EQ takes a closer look at the recent changes in pension taxation limits

What does the future hold for annuities?

14 Sights set super high

EQ takes a look at the demise of contracting-out

Meet Wendy Edwards, Company Secretary at the rapidly expanding SuperGroup

16 Thinking outside of the box

The private sector has the answers to the public sector’s problems

18 A watchful eye

The Government takes action as concern grows over pension pots

19 All change

Charting the recent changes in the pensions industry

20 A world of choice

Anytime Enrolment puts the flexible into flexible benefits

30 The end is nigh

32 The art of smart

How artificial intelligence can help you to manage information overload

35 Big data, big impact

Equiniti Data Services can help you manage epic amounts of data

36 Share and share a like The psychology of social media

38 A fair deal

Competition is set to hot up as the new fair deal regulations are welcomed

40 An unwanted legacy

Equiniti looks at what banks can do to manage legacy accounts

22 Older and wiser

Baroness Greengross talks about the challenges of an ageing population

equiniti.com > 3

EUROPEAN BANKING UNION

UNIT D WE STAND The European Banking Union is set to introduce long-term reform to eurozone banks in an effort to prevent any future debt crises and taxpayer-funded bailouts

I

t is now six years since the beginning of the debt crisis that put the EU project in jeopardy.

Greece, Ireland, Portugal, Spain and Cyprus fell one by one, and subsequent bailouts rocked the eurozone. History has a habit of repeating itself, but the EU is hoping to strengthen the eurozone’s banking sector by introducing a set of common rules and measures through a new European Banking Union.

“The main objective of the Union is to simply try and make the monetary union look more like a real monetary union,” explains Sharon Bowles, MEP for South East England and Chair of the European Parliament’s Economic and Monetary Affairs Committee. “In the UK, our central bank has the freedom to do what it likes in monetary policy terms and then tailor it to our currency. The eurozone isn’t one country. Following on from the sovereign debt crisis, the idea is to cut the link between sovereigns and banks. I think it is difficult to completely sever that link, but by reducing it, you avoid the vicious spiral of something untoward happening in a bank, which then destabilises the sovereign, which in turn destabilises the bank, and so on.”

The European Banking Union comprises three pillars: a Single Supervisory Mechanism, a Single

4 > EQ | summer 2014

Resolution Mechanism and a common deposit guarantee. The first places eurozone banks under the supervision of the European Central Bank (ECB), which will be given powers to closely observe the decisions taken by those banks. The ECB’s new role will be followed by the introduction of a resolution scheme, which will help bank crises be managed more effectively. The Single Resolution Mechanism states that if a bank in the eurozone is in need of rescue, a common resolution authority will manage the process of bailing it out – or closing it down if necessary – using funding from a levy on the banks. And eventually, a common deposit scheme will also guarantee up to a limit of €100,000 for anyone with an ordinary bank account in the eurozone.

The ECB is due to take over the supervision of the eurozone’s banks in November of this year and will have the power to step in if a bank gets into trouble. It will monitor some 6,000 banks, and have direct supervision over those 130 eurozone banks with assets greater than €30bn. Countries in Europe which do not use the euro can opt in to the arrangements with the ECB should they wish to. However, Sharon believes it is unlikely that the UK will choose to enter into the agreement: “For a relatively large country outside of the eurozone like

GETTY IMAGES

the UK, I’m not sure that the advantages outweigh the disadvantages because we have our own currency. It’s quite difficult for those not in the euro, if you like, to enjoy the full advantages of it.”

But she says the Union has been welcomed by the UK as it encourages stability, and a stable eurozone is always in the best interests of the UK economy. “It did create more of a ‘them’ and ‘us’ between the eurozone and non-eurozone countries, which is concerning if it is harming the single market. But this is a lesser evil than an unstable eurozone, and the UK has done a lot of work in the negotiations to ensure the single market and a level playing field are maintained.

“The UK has got branches and subsidiaries of banks that are in the banking union,” she adds.

“For instance, Santander operates as a subsidiary in the UK. There is an interaction, and if there were ever the need for any kind of banking resolution, Europe is more intertwined than just the eurozone or the banking union, and you have to take account of what happens both in your own territory and outside. The UK did this when it was rescuing our banks during the crisis.”

Moving from national sovereignty to more economic integration is never easy, however, and the second pillar of the Union has caused much

debate. Under the agreement made in December 2013, eurozone banks will be required to pay an annual levy for a national resolution fund. The fund will collectively be worth around €55bn and move from being national to centralised. There were numerous discussions on how quickly the fund would be mutualised, and Germany, already

Under the agreement made in December, eurozone banks will be required to pay an annual levy for a national resolution fund a big contributor to another EU bailout fund, was particularly concerned about this. But, under a draft agreement settled in March this year, it was confirmed that the fund will be built up over a period of eight years, and around 40% of it will be shared early on. New rules forcing the

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EUROPEAN BANKING UNION

6 > EQ | summer 2014

EU Commissioner for Internal Market and Services, Michel Barnier, discusses the Single Resolution Mechanism

:: BETTER TOGETHER

Brett Jesson, Business Development – Financial Services, offers Equiniti’s view of the recent changes in Europe “Within the financial services sector, in the areas of retail banking, and life and pensions, there are three key factors that need to be thought about: legacy, customers and innovation. The European Banking Union’s additional regulatory requirements mean that regulation is being added onto organisations that already face significant challenges in terms of legacy technology and streamlining processes. The European Banking Union adds more pressure to the ability of any financial organisation when it should be focusing

on delivering new products in an innovative way for its customers.

“Previously, reporting was required of the top 100 banks across Europe. Now, the top 1,000 banks will be required to report in a certain way to the ECB. Off-the-shelf packages can help with that reporting.

Equiniti also has the capacity to factor in regulatory change and requirements in the way we contract and make commercial agreements with you. We will look at regulatory change as a partnership.”

GEORGES GOBET/AFP/GETTY IMAGES

bondholders of banks to take on losses were also finalised.

“Ultimately, there will be a shared fund, which will again help break the link between being a big, rich country that can save your banks, and being a small, poorer country that can’t,” explains Sharon.

“The money will come from the Bank Recovery and Resolution Directive, which is meant to be 1% of the banks’ assets minus other factors. It’s the same amount that every country has got to build and it is of a proportionate size to their banking system – the UK will have one, as well as other countries.

But the idea is that the eurozone, instead of having 18 separate resolution funds, will have one that they share. That will help to make everything more stable.”

Sharon believes the Union should also make the eurozone more streamlined, as there will now only be one resolution authority instead of the previous 18. “The ECB will be the ultimate supervisor.

European regulation as a whole is tighter in financial services now that a lot of it is done by way of regulation rather than a directive,” she says.

“Everyone is confident that the ECB will stand up and be as strict as the Bank of England. There will be more market confidence in the fact that banking regulation is applied equally as strongly across the eurozone.

“Regulation is always for the single market. For the eurozone, with the exception of deciding how the ECB is going to provide this supervision, and there will also be the single resolution authority, all the rules are exactly the same as those applied in the UK by the Bank of England and the FSA. It’s not a different set of rules. It’s about protecting the single market to help ensure what we have seen in past doesn’t happen again.”

Only time will tell how strong the Union will be in the face of any future debt crises, but Sharon believes it is definitely a step in the right direction: “If we are talking about the whole project of the eurozone, including the banking union and what’s happened over the last five years, there has been a huge amount of repair work done to make it into something stronger. The fact that there will be better supervision, and work has been done on banks to improve their capital base, has already paid off to some extent, and I think it will continue to do so.”

NISA

MORE for your money Saving just got a whole lot NISA

here is a fine balance between making savings and investment options available to staff and making recommendations.

This is often a point of concern for employers, who cannot and should not be expected to provide financial advice. However, as part of their wider commitment to providing a duty of care to their employees, they may wish to support their financial planning.

ISAs have always sat neatly alongside more traditional benefits, such as pensions and share plans, and the new ISA, ‘NISA’ announced in the 2014 budget, with its improved flexibility, has become a more interesting proposition.

T

As part of the Budget announcement in March of this year, the Government introduced changes to ISAs, which give savers and investors greater choice and flexibility about when and where they place their funds. This in turn will help to reduce employers’ concerns about appearing to be directing staff down a certain savings route.

ISAs in the corporate world have a number of potential benefits for employees. They can provide them with ongoing protection from tax when a share plan matures, enable them to diversify from a single stock holding to a risk-managed portfolio, allow them to work towards a source of tax-free income in future years* and, since income can

be taken out at any time, they are less restrictive than a pension.

Cash ISAs are low risk, but at the same time, they offer lower returns. Stocks and Shares ISAs are higher risk, but they have the potential for higher returns on your investment. With this greater flexibility the NISA allows employees to choose the savings and investment combination that best suits their needs, and provides them with the opportunity to make changes throughout the tax year. Their flexibility should give greater comfort to employers who wish to include ISAs in their employee benefits offering.

Outlined below are some of the key features of the NISA, which come into force on 1 July 2014.

:: ALLOWANCES From 6 April until 30 June 2014 the new allowance will be £11,880. From 1 July 2014 until 5 April 2015 it will increase to £15,000.

It will also be possible to split the ISA allowance in any way between a Cash ISA and a Stocks and Shares ISA. Previously, savers had to use all of their ISA allowance in a Stocks and Shares ISA or use a maximum of 50% in a Cash ISA, with the remainder in a Stocks and Shares ISA. The Junior ISA limit will also increase to £4,000.

Funds transfers

It will be possible to transfer funds from a Stocks and Shares ISA to a Cash ISA, and vice versa, from July. Previously it was only possible to transfer funds out of a Cash ISA into a Stocks and Shares ISA.

Tax-free interest in Stocks and Shares ISAs

Interest earned on cash held in a Stocks and Shares ISA will no longer be taxed.

ISA allowances

Stocks and Shares ISA limit 6 April 2014 - 30 June 2014

£11,880 (less any contributions made to a Cash ISA)

1 July 2014 - 5 April 2015

£15,000 (less any contributions made to a Cash ISA)

Cash ISA limit 6 April 2014 - 30 June 2014

£5,940 (less any contributions above £5,940 made to a Stocks and Shares ISA)

1 July 2014 - 5 April 2015

£15,000 (less any contributions made to a Stocks and Shares ISA)

*BASED ON CURRENT LEGISLATION

equiniti.com > 7

PORTRAIT BY ANTHONY UPTON

THE SALES CLUB

8 > EQ | summer 2014

There’s no secret to his success After making his fortune from a tech firm launched in the living room of his flat, selling software to Downing Street via the Prime Minister’s wife and starring in Channel 4’s Secret Millionaire, Gordon McAlpine has learned a thing or two about maximising your potential. So much so, that he started a club to spread the word.

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THE SALES CLUB

S

itting on the terrace of his dream house in the south of France, staring peacefully out towards the surrounding hills, with his wife by his side and the fruits of a decade’s hard work in the bank, Gordon McAlpine could easily have called time on his working life by the tender age of 40.

He and his partner, Stephen Thompson, sold their highly successful tech start-up, BigHand, in 2006. But after building a business turning over £7.5m a year from humble beginnings in the living room of a flat in London’s Docklands (and without a penny loaned from the bank), his entrepreneurial spirit was always destined to drag him back into a new project.

Gordon founded The Sales Club in 2009, bringing together busy, under-pressure sales leaders to learn, share, network and generate ideas with their peers. The club, which is described as ‘the centre of excellence for sales leaders’, does not offer sales training or consultancy, but is a cross-sector networking club hosting events and laying on top speakers from the business world and beyond.

In the current business environment, this focus on developing people and encouraging fresh thinking couldn’t be more important. Amid increasing competition, all companies must seek differentiation and provide greater value in the way they interact with clients and customers. Products and features are soon copied or improved upon by competitors. So, to develop value that can’t be replicated, companies must develop skills and capabilities in terms of how they interact with customers. Any business that can offer help with that is worth listening to.

“I was the Sales Director at BigHand in a small, successful, entrepreneurial company, and sales is the engine room of a business,” says Gordon. “I was constantly thinking, ‘How can we get better at what we do?’ I spent my whole life thinking that, and in the meantime I was juggling selling, managing and strategy. I was sending these sales guys out thinking, ‘How do I know how good they are in client meetings? How good are they at closing? How good are they at their telesales work?’

“All the ideas for bringing new things into the business were mine. I was the 10 > EQ | summer 2014

vehicle and it completely exhausted me.

I started searching the internet for ‘Sales Club’ and ‘Sales Forum’ because I didn’t want to get a training company or a consultant to tell me what to do. I felt like I wanted to join something to come back from that club with ideas, feeling re-energised and motivated from speaking to peers with similar issues.

“I was sitting on this terrace in France and all this creative stuff started coming out again. I thought, ‘We could go to people’s businesses and see what they do.

We could put on inspirational speakers.

We could bring top speakers from America to talk about the latest tools and techniques.’ I thought that surely if I launch it, and get behind it, then it’s going to be successful.”

And with his track record he could rightfully be confident. After completing a master’s degree in marketing, Gordon

“I felt like I wanted to join something to come back from that club with ideas, feeling re-energised and motivated from speaking to peers with similar issues”

Gordon founded The Sales Club in 2009 to bring together busy sales leaders to learn, share, network and generate ideas

:: IN THE SALES CLUB PIPELINE The Sales Club’s next event is a day at Jaguar Land Rover in July. Experts will share the performance strategies and best practices behind the company’s impressive sales growth. The club has also recently launched a category called ‘Rising Stars’ for sales managers managing small teams, and is growing its searchable database of articles and content for members.

Visit www.thesalesclub.co.uk for more information.

started out at pharmaceutical firm AstraZeneca in a sales role.

“They said I must learn how to sell before I could understand marketing,” he says. “So, with a heavy heart I agreed to become a sales person. I never thought I could sell anything to anyone – ‘The Accidental Salesman’ if you will. They started me in a territory in Edinburgh known as the reps’ graveyard.”

Struggling to get his foot in the door, he showed his sales cunning with a new tactic. He took delivery of 300 unwanted lamps from his head office and started delivering them to surgeries to get himself in front of doctors.

“It sounds childish, but it worked.

I found an entrepreneurial way of breaking down the barriers,” he laughs. “To cut a long story short, I got right up there in terms of performance, and eventually I got promoted to my dream job, Head Office

Marketing Executive. But after two years I decided I had to set up my own business.”

That business was BigHand, which he established with Steve, a friend of his brother. They started out re-selling speech recognition software.

“We had our life savings, which totalled about £25,000 between the two of us, and we vowed never to borrow money and to be an organic success story. We put pressure on ourselves. If we were struggling we had to go out and make more sales, more revenue, more profit and take people on. To some people it might seem like a very old-fashioned model, but it worked for us.”

Gordon recounts how he sold the software to Downing Street after an eyecatching demonstration for Tony Blair’s wife, Cherie, at a lawyers’ conference.

“I called up Downing Street the day after the conference and said that we’d

met Cherie and wanted to come in and talk to her as she seemed to like our product. The IT Director said that he wasn’t interested and put the phone down. The call had sickened me, so I put the card away, but about three months later, I decided to call again, because you don’t give up in sales. ‘No’ is when the selling begins.”

Gordon and his team were then invited in to do a demonstration and Cherie herself agreed to take part in a pilot scheme for the software. “I was punching under the table. It was brilliant,” says Gordon.

The breakthrough came for BigHand when they developed their own digital dictation product and sold it to major law firms. “Suddenly, I knew we were going to be successful,” says Gordon. “But it was a question of how we did it. So from that day on, I worked on building the sales and marketing team to sell that equiniti.com > 11

THE SALES CLUB

product throughout the UK legal market, and then to go global, which we ended up doing.”

He finally sold the business in 2006 in a management buyout. “Me and Steve felt like we’d done our job. We’d got to a company of 50 people, and we’d turned over £7.5 million with a profit of £2.5 million, so we were ultra profitable with £3 million cash in the bank.

“We were sitting there in ripped jeans looking scruffy, both living in rented accommodation. We were classic entrepreneurs who had thrown the kitchen sink at it. We felt we owed it to ourselves and to our families to crystallise a bit of the hard work. We felt that it

was time to get out and leave it to the management team, and move on to a different era.”

Today, Gordon is back in charge of a burgeoning business with The Sales Club now boasting 70 members (including Equiniti) ranging in size from British Airways, American Express, Audi, Toshiba and Eurostar to a host of SMEs. Gordon says: “One of my visions was that if you put some big companies in there, they will bring best practice and some really great systems, controls and processes. And if you put in some fast-growth entrepreneurial companies, they will add some sharper operating practices.

“The guys at the top are quite happy to talk to fast-growth SMEs if they think there’s a good conversation to be had”

:: THE SECRET MILLIONAIRE In 2010 Gordon returned to his native Glasgow for an episode of Channel 4’s Secret Millionaire, where he worked with hard-up charities for a week before donating tens of thousands of pounds to help them out.

He says: “They took me to Govan. It was very emotional because I was going back to Glasgow, but to the other side of the tracks from where I grew up. It’s the part of Glasgow that, to be completely honest, you would try to avoid, so it was quite scary.

“Working with volunteering organisations, you see people who are working for nothing but are incredibly positive about what they do. They walk away at the end of the week

12 > EQ | summer 2014

McAlpine described being on Secret Millionaire as completely life-changing

without any money. Seeing things like that is very humbling. It strips you back as a person.

The whole experience was completely lifechanging.”

“We’re mixing it all up, and that’s one of the big advantages. Speaking to the Sales Director of British Airways or American Express is quite aspirational if you’re in a small company. The guys at the top are quite happy to talk to fast-growth SMEs if they think there’s a good conversation to be had. It’s totally cross-sector, because one of my beliefs is that too many sales departments are too blinkered to their own field. This allows people to get their heads up, look outward, and learn from the club. You cannot Google the stuff in The Sales Club.”

David Beresford, Group Strategy Director for Equiniti, says: “The companies that are going to be successful in the future are those that have the best client interactors. The Sales Club is about building sales capability to go out and have these great client interactions and build competitive advantage.

“Clients are under enormous pressure for time. They want people who’ve got new ideas, and access to those ideas, or to people who can help them think about their business in a different way. One of the great advantages of the club is that you can practically apply the thinking that comes out of the sessions the very next day when you go and see people.

“We all have similar challenges. We need to grow revenue and profit, get in to new markets and launch new products.

We need to sell more to current clients and win new clients. The club sets up buddy relationships between people with similar issues. It doesn’t matter if it’s cars or travel you’re selling, whether it’s software you’re developing or whether it’s business process services.”

Gordon says his experience on Secret Millionaire, where he donated tens of thousands of pounds to charities, showed him that making a difference is the most important thing for him.

“I need to do things that are meaningful in life. I guess in terms of business, The Sales Club is a very meaningful business, because we’re doing things to try and help organisations and people. But I’d love to be able to give more money back over time as well. I’d love to be philanthropic for years to come. If I can make this business successful, I’d love to go back to Govan and give them another £50,000 each.”

SENIOR STAFF TAX BILLS

A higher price to pay MyCSP’s Business Development Director Virginia Burke talks us through the recent changes in pension taxation limits

F

ollowing reductions in pension taxation could be on the receiving end of a hefty tax bill. limits as of April this year, thousands of These individuals range from middle to senior private and public sector pension scheme management in private businesses to senior fire, members could face a tax charge by police, NHS, armed forces, local government exceeding their lifetime allowance (LTA) workers, head teachers and civil servants earning or annual allowance (AA). This could potentially over £100,000 a year, retiring after a full career. create real challenges for employers, who could This doesn’t take into consideration the reduction face a barrage of enquiries or complaints, unless in AA, which is likely to have a huge impact on both they implement an appropriate the private and public sector. communications strategy.

MyCSP is advising that pension For defined contribution scheme managers identify those :: CRITICAL DATES (DC) schemes, the issue is fairly members likely to be affected and straightforward. However, it is not discuss the changes with their so straightforward for members employees. This will help them of defined benefit (DB) schemes, 6 April 2014 to understand what actions they where there are a number of Annual allowance reduced need to take. Factors that should complexities to deal with. DB from £50,000 to £40,000. be considered during discussions members look at their retirement Lifetime allowance reduces with members are when they plan pension based upon what they will from £1.5m to £1.25m. to retire, the amount of cash they receive and not a notional ‘pot plan to take, how their pay might of money’ sitting there to pay it, Individual protection increase in the future, further which HMRC calculates to be 20 becomes available and pensions savings from other times the annual pension. members retiring will employers, dependants’ benefits From 6 April 2014, the LTA, be subject to the lower and options for flexible working. which is the maximum amount of Crucially, there was an option lifetime allowance. pension savings that benefits from for members who had exceeded tax relief over a person’s lifetime, the £1.25m allowance to protect reduced from £1.5m to £1.25m. their money. They could have May–October 2014 The AA, which qualifies for tax applied for ‘fixed protection 2014’, Pension savings statements enhancement, will also reduce issued in respect of which would have retained the from £50,000 to £40,000 in 2013/14 tax year. current LTA of £1.5m. However, any one year. they must have applied for this What this means is that if a before 5 April 2014 but, as a member’s accumulated pension result, no future pension accrual is pot is below £1.25m at retirement, permitted after 5 April 2014. they can take their pension in the normal way, To help employers communicate the changes, including any tax-free lump sum. However, if a MyCSP has launched a new service that explains member’s funds are worth more than £1.25m, they the impact. It incorporates seminars, individual may face a tax charge of 55% on anything over and projections showing the potential impact of the above this amount. changes in various scenarios, and one-to-one At the moment, we don’t have any definitive sessions with senior staff. statistics around how many people could be affected by these changes, but our estimates For more information on how MyCSP can help, lead us to believe that many thousands of people please contact training@mycsp.co.uk equiniti.com > 13

SUPERGROUP PLC

Sights set super high Wendy Edwards, Company Secretary at SuperGroup tells us more about the excitement that comes with working with such a rapidly expanding brand.

it is always looking for ways to do things, rather than looking for reasons not to do things. There’s a culture of constant reinvention. The pace we move at is also really exciting, but that comes with its challenges, as is the case with any business that has recently listed.

Tell us about your role with SuperGroup

What are your key priorities?

I joined the business in 2010, which was just before SuperGroup floated, and I came on board to provide support with that process. A key challenge was to start putting in place the processes required for a public limited company. This involved starting from scratch, to ensure that the business was able to make the move from being a limited company to a plc. I had to implement a corporate governance framework, set up a board meeting structure, appoint registrars, and basically do everything else that needed to be done for the business to make the switch. It has been an incredibly busy period, as SuperGroup converted to a plc in a very short period of time, and was one of the few companies to make an IPO (Initial Public Offering) in 2010.

What made SuperGroup stand out for you when you were looking for a new opportunity?

I had been in the corporate world for a while and I deliberately left it because it can become boring and predictable.

When I started to research SuperGroup, I realised just how exciting a company it was. At the interview, I could see how passionate people were about the brand.

The whole place had a pulse.

What are the key strengths of the company?

There is real energy and innovation that exists within SuperGroup. As a company, 14 > EQ | summer 2014

These have changed during the four years I have been with SuperGroup. In the early phases it was about putting board structures in place and getting non-executive directors recruited to meet the needs of a listed company. The management team here has really seen the value of having independent non-executive directors to challenge and support the business. We recruited our Group General Counsel last September, and my role now includes focusing more on compliance.

This covers things like anti-bribery, data protection, whistle-blowing and ensuring compliance with our regulators, to include the London Stock Exchange. I am still actively involved with the team here to manage the cycle of board meetings and all that goes with that in terms of decision making and chasing up actions.

How has SuperGroup fared during the global economic downturn?

Retail conditions have been very tough over the past couple of years. The customer has become more and more discerning and very selective with how they want to spend their money. But, we have been very resilient. Our Q4 results were announced recently and we still have fantastic growth and great profits.

We do recognise that we can never be complacent, as the current conditions are tough to trade in.

What are the benefits to working with Equiniti?

The customer service that Equiniti provides is very good. As a company, it is good at looking for solutions to problems and to finding ways to do things rather than ways not to do things. The staff are real experts and always mindful of compliance, which is essential when a business is so tightly regulated. The share register analysis work they also do for us is great, as it is clear and user friendly. We have a very good relationship with Equiniti and they are always just a phone call away. They are a very responsive team to work with.

Can you tell us some of the lessons you have learned throughout your career?

As a company secretary, you have to keep learning. You need to always stay fresh with your subject matter, and be aware of the changing economic environment, which will help you to ensure that you can deliver value for the business you are working for. Networking is also important and not just for progression, but to learn from others and keep up-to-date with what’s going on in the industry.

If you were able to choose a completely different career, what would it be?

PORTRAIT BY JAMES MEIGH

WENDY EDWARDS

“You have to keep learning and always stay fresh with your subject matter” I would definitely do something related to design. I used to work as a financial controller for an interior design company, which was incredibly interesting. It actually inspired me to study interior design, so if I had my time again, I’d work in the design world.

What do you like to do to relax outside of work?

I love gardening and spend as much time in my garden as the weather allows me to.

I also enjoy art and go to exhibitions when time allows. And, I have a real love for music. I play the flute and the piano and I find that music is a truly fantastic way to relax and escape from the world. Another thing that I enjoy – but it’s not quite as

easy to do when you live in England – is skiing. I find that very relaxing.

Do you have any secret talents?

I’m a qualified masseur. Not very many people know that, but I love receiving a massage – it’s such a good way to unwind.

Equally, I enjoy giving a massage because I really like it when you can help someone to relax. In this mad world that we live in, being able to give someone the ability to switch off is a gift and a massage certainly does that. It’s so nice to be able to do this for people.

If you could invite three people to dinner, living or otherwise, who would they be and why?

One would be a long-standing friend who has a brilliant name – Zog Zeigler. He is a motor journalist and has a great command of the English language and uses it to its full. He is full of fantastic stories and brings everything to life. He is a great fillip, someone who energizes every situation. The other is a man I had the privilege of living across the road from. He was 101 when he died last year; Dr Dick Jarrett was one of life’s greats. He was young and curious right up to the very end. He was a dapper dresser too! The other would be a lady I worked with at Cheltenham Ladies’ College, Vicky Tuck, the previous principal. She was somebody that had a rare combination of a fantastic business and academic brain and she is also great company. equiniti.com > 15

Thinking outside of the box GETTY IMAGES

When it comes to public sector cuts, the private sector has the answers

16 > EQ | summer 2014

PUBLIC SECTOR CUTS

S

ince the financial crisis rocked the world economy back in 2007 there have been a number of changes to how Government manages its finances. Nobody has escaped austerity measures and although there are signs of recovery, the level of debt is such that more cuts are required, especially in the public sector.

In order to balance the books, the UK Government is turning to the private sector to utilise its expertise to help reduce current debt levels. “The Civil Service has a very good reputation for delivering on policy and dealing with diplomatic situations, whereas the private sector can offer innovation and operational excellence, which can help Government to drive costs down. So by outsourcing to the private sector, costs can be reduced, and at the same time, a better level of service can be delivered,” explains Steve Lamey, a Consultant Advisor on the public sector marketplace.

With the cost of debt levels running into the billions, rather than implementing huge tax rises, the Government is leaning increasingly towards outsourcing services to help reduce costs: “The private sector has a fantastic opportunity to build a relationship with Government to combine expertise for the benefit of public services,” explains Marina Calcutt, Business Development Director, Equiniti.

“There is a real appetite in Government to start adopting some of the ways the private sector works, especially around innovation and the way it streamlines processes, and as part of this, they have started to think about how they can get the most out of their relationships.

That means going so much further than working with private sector organisations that just deliver against a service level agreement (SLA) – it needs to be a partnership,” Marina says.

By developing partnerships based on value rather than just achieving a list of pre-agreed outcomes, both the public

“There is a real appetite in Government to start adopting some of the ways the private sector works, especially around innovation and the way it streamlines processes” and private sector can gain so much more value from the relationship: “It’s all about collaboration and working together to establish how to get the best value out of that partnership. Government is now acknowledging that the supplier relationship is just as important as some of the metrics that come out of that relationship. “In the past it has been a one-way street, where suppliers have just been asked to deliver to a certain degree,” Steve says. “But that conversation is now opening up and that’s a really positive thing because it means that the private and public sectors can come together and get value out of those relationships.”

In addition to Government’s change in mood, there has also been a change in attitude, and a desire to harness the creativity that can come from the private sector, with the Government then benefitting from the efficiency in savings.

Furthermore, there have been occasions when Government relationships with private sector companies have hit the headlines, which has brought some key lessons to the fore: “There have been major issues in the past, which indicates that there has to be a change in the way the public sector works with the private sector and it’s all about moving away from the terms of a contract to a collaborative relationship,” says Steve.

“The private sector also needs to be aware of the appetite for risk in Government,” Steve explains. “It is very low and they need to know they are in safe hands if they are going to enter

into a partnership with a private sector organisation.” This attitude to risk has given way to a joint-venture model, where rather than outsourcing a whole operation, the Government – in direct partnership with the private sector – manages a specific project. “Government is very keen to do more joint ventures, as it gives them greater control over largescale contracts and helps to minimise risk. It is better for both parties as it allows you to be on the journey together; you’re not working against each other and so going forward I think you will see a lot more of this, rather than just pure outsourcing. Joint ventures are incredibly interesting and Equiniti is working with Government on some of these, so it is a very exciting time,” says Steve.

“As an organisation, Equiniti is able to use the expertise it has built up over the years of working with different organisations – including the recent success of the MyCSP joint venture with Government – to help drive down costs,” Marina says. “In turn, this will have a positive impact on the current debt afflicting the country and help to turn things around for the future of Great Britain.

“Equiniti is in a unique position to engage in further partnerships with Government,” says Marina. “Government has acknowledged that utilising the skills and expertise of the private sector will help to drive down billions of pounds of debt.

Once that has been unlocked, it will have a massive impact on our economy.” equiniti.com > 17

PENSION POT FOLLOWS MEMBERS

A watchful eye

A

lthough its intentions are good, the Government’s proposal for dealing with the growing number of small pension pots could have serious consequences. “The Government’s current plans could have a huge impact on both members and those involved in the administration of work-based defined contribution (DC) pension schemes,” says Peter Scott, Technical Consultant, Equiniti Paymaster.

This is down to the Pensions Act 2014, which contains the framework of the government’s proposed pot-followsmember system (PFM). “The new PFM system will see work-based DC pension funds automatically follow employees when they change jobs,” Peter explains.

The details of PFM will be set out in regulation yet to be published. In its current form, PFM only applies to funds that are less than £10,000 and have been created after a date to be set out in the regulations. Older pots may be dealt with at a later date.

“Under the Pensions Act 2014, PFM will apply to so-called automatic transfer schemes (ATS),” Peter says. “An ATS is currently defined as a registered work-based money purchase pension scheme that meets with any prescribed conditions. As of yet, we don’t know what these ‘prescribed conditions’ are likely to include.”

The trustees of an ATS will have to issue a transfer notice to another scheme where they find that a member has transferable benefits under that scheme. The transfer notice will request the transfer of the cash equivalent of the member’s benefits

18 > EQ | summer 2014

As concerns over pension pots grow, the Government takes action. But is PFM really the best solution?

:: POTENTIAL PITFALLS Critics of PFM have pointed out the following shortcomings that they feel have not been adequately addressed: F ees in the receiving scheme could be higher than those under the transferring scheme.

A member’s retirement savings could be moved to a scheme with a less robust governance structure.

R epeatedly switching retirement savings out of investment assets into cash and back again might expose a member to multiple charges, reducing the eventual level of their fund at retirement.

A utomatic switches will not take account of current market conditions, requiring members to be market savvy and opt-out in order to avoid being moved at a bad time.

to the ATS. “Once the transfer notice has been received, the other scheme must do everything necessary to effect the transfer,” Peter says. “But the member will, however, be able to opt-out of the PFM process.”

One of the main practical issues with PFM is how the ATS will find out that a new employee has pension rights under another pension scheme. In order to establish this, the Government has put forward two options: either a central potmatching IT-based solution, or a pensions transfer information document similar to a PAYE P45 that the employee passes to their new employer when they start work.

“Government has yet to make a final decision as to which system it prefers,” Peter says. “But how much appetite there will be in central government for beginning yet another major IT-led project remains to be seen.”

As Peter explains, PFM will also introduce an additional level of complication in the administration of DC schemes. “This could pose a particular problem for those large national schemes which have grown out of the autoenrolment legislation and which are likely to see a large increase in transfer activity – both in and out.”

The Pensions Act 2014 also contains provisions allowing for PFM-specific disclosure and record-keeping duties, and financial penalties may be imposed on those who fail to comply.

“Nobody can argue with the sentiment behind PFM. It is, after all, intended to help people manage and keep track of their pension savings,” says Peter. “Time will tell whether or not this will have the desired effect.”

CHARTING PENSION CHANGES

Pensions pathway From the Chancellor’s shock Budget announcement to the increase in pension age, David Ellis charts some of the most significant changes that have taken place in pensions recently.

MARCH Budget 2014 In a surprise move, the Chancellor announced the most radical changes to the UK pensions system in decades. The following changes came into effect on 27 March 2014:

• The two triviality limits at which a member’s pension fund may be paid entirely in a lump sum in two sets of circumstances increased to £30,000 (from £18,000) and £10,000 (from £2,000).

• For personal pensions, the number of pension pots to which the new triviality limit of £10,000 may be applied increased from two to three.

• For defined contribution schemes, the maximum annual limit for income drawdown increased to 150% (from 120%) of an equivalent annuity.

The following proposed changes (currently under consultation) become effective from April 2015.

From the age of 55, a member with defined contribution pension savings will be able to: • Take their entire pension fund in the form of a lump sum (but subject to their marginal rate of income tax) • Buy an annuity (using some or all of their pension fund) • Apply income drawdown to some or all of their pension funds (without any limits on the amount and no minimum income requirement).

Other proposed changes are that the minimum age pension benefits may be taken should increase in line with changes to the state pension age. Also, the transfers of benefits from public sector defined benefit schemes to defined contribution schemes are expected to be

banned. A ban may also be applied to private sector defined benefit schemes.

Charges cap The Government has proposed a cap on charges under defined contribution workplace pension schemes of 0.75% of the funds. This would apply to default funds under the schemes that are being used for the purposes of automatic enrolment.

APRIL Local government pension scheme The revised local government pension scheme came into force.

Finance Act 2014 The following features took effect:

• Annual allowance reduction to £40,000 • Lifetime allowance reduction to £1.25m • Introduction of fixed protection 2014 and individual protection in order to safeguard benefits from the lifetime allowance reduction.

Disclosure The new harmonised disclosure regime, which requires trustees/scheme managers to provide scheme members with certain information, within certain timescales, takes effect.

GMP reconciliation In the lead-up to the removal of contracting-out of the additional state pension in 2016, HMRC has launched a new service to confirm the GMP amounts for members with deferred entitlements or pensions in payment. GMPs (guaranteed minimum pensions) are elements of benefit secured for members of defined benefit schemes for the period when they were contracted-out of the additional state pension.

MAY Defined contribution benefits The Government has responded to a recent consultation, which attempts to produce a legal definition for defined contribution benefits (formerly known as money purchase benefits).

The unfortunate end result of this exercise could well be that some nonmainstream benefits, which were previously believed to be defined contribution in nature, end up on the defined benefit side of the legal fence.

Budget 2014 Amongst the many items published in March’s dramatic and widely unexpected Budget announcement, the following are of interest:

• HMRC has provided detailed guidance for those members who were in the process of retiring but wish to take advantage of the new flexibilities available from April 2015 • The Pensions Regulator provided a budget update.

Pensions Act 2014 This finally received Royal Assent on 14 May 2014 and, amongst other things, contains the following provisions:

• Changing the state pension age • Bringing into force the single tier state pension • Ending contracting-out • Introducing the Government’s charge cap for defined contribution workplace pension schemes • Providing for the automatic transfer of small defined contribution pension pots • Abolishing early leaver refunds from defined contribution workplace pension schemes • Further secondary legislation will be needed before many of these come into effect. equiniti.com > 19

FLEXIBLE BENEFITS

Since life doesn’t wait …

You shouldn’t have to wait to make your benefits choices

W

e live in a 24/7 society, where we can access almost anything we want at any time. It makes sense that as we embrace flexibility in other areas of our lives that the world of employee benefits should be keeping apace to deliver solutions to both employers and employees that meet the demands of our ‘access all hours’ society.

“Anytime Enrolment is really starting to pick up steam now,” explains Tim Brook, Senior Employee and Online Benefits Consultant at Equiniti. “It allows employees to move away from an annual benefits selection window and gives them the opportunity to select their benefits at any time.

It gives employees more flexibility, and for employers, it adds another positive factor to working for them.”

Although Anytime Enrolment is growing in popularity within the flexible benefits market, allowing employees to choose their benefits whenever it suits them does present some over-arching challenges. “There are a range of benefits that don’t naturally fit in with an Anytime Enrolment model,” says Tim. “For example, insurance policies where a 12-month commitment is required to a policy; it’s more of a challenge to include these sorts of benefits within Anytime Enrolment.

“In this case, what we would be looking to do is

20 > EQ | summer 2014

build in a 12-month lockdown period within the flexible benefits package, so unless there are policies and periods that are agreed with the provider, employees wouldn’t be able to cancel those,” he adds.

Anytime Enrolment has been widely available for the past two years, but technological capacity and provider buy-in mean that employers have only recently started taking advantage of it. “The demand for Anytime Enrolment has been there for some time, but there wasn’t the technological capacity within the market to support it,” Tim explains. “On the other hand, Equiniti has been offering Anytime Enrolment to new employees since 2006. So in that regard, we are leading the way.”

Tim and his team are now working with a client to develop the functionality required to secure the risk benefits that can be associated with Anytime Enrolment. “We’re working with a client to develop the functionality around locked-in periods,” he says. “Once the market as a whole conquers this, we will move another step closer to a seamless Anytime Enrolment model.”

Apart from the flexibility Anytime Enrolment gives an employee, there are also a number of other more practical benefits: “As your circumstances change, you can tailor your benefits to suit you,” says Tim. “For example, your employer participates in a Cycle to Work scheme and your own bike gets stolen. You don’t want to have to wait

GETTY IMAGES

12 months for a new bike – you would want to buy it at the point that it is needed. That’s where Anytime Enrolment comes into its own and enables you to go and get a new bike straight away.

“When you find out you are expecting a child, your circumstances undoubtedly change dramatically.

With Anytime Enrolment there is the freedom to take up Childcare Vouchers sooner rather than later, which would prove to be hugely beneficial.”

There are also benefits for the employer: “Having Anytime Enrolment flexible benefits gives employees a more compelling product or benefit to working for a particular company, and demonstrates that the employer understands the needs of employees’ flexible lifestyles.”

As Anytime Enrolment gains a foothold, the next natural step is to house all benefits in one place that is easily accessible for employees. “We are currently working to establish a one-stop-shop in Portal, where employees can manage all of their benefits,” Tim says. “At the moment we have the ESP Portal where people can transact on their shares, we have Shareview, which shows the

ordinary shares that we hold, and we have the Flex Portal for making flexible benefits choices. And so what we are trying to do with Portal is bring in an over-arching website linking all of these applications together. Along with that would come a total reward statement and pensions statement that would enable employees to get a really good picture of what their complete package is, working for their company,” Tim says.

“Our benefits portal has huge scope for growth over the next four or five years.

It’s something that we are investing heavily in and will continue to add to, which helps to make it constantly more appealing for staff. We are looking at all sorts of elements, spanning from HR services and payroll all the way through to financial education and things outside of the employee sphere in terms of linking personal bank accounts and mortgage information, which would help to make it a one-stop-shop for employees’ full financial planning. There is a significant piece of compliance work to do around this but it is something we are working on. It is an exciting time for flexible benefits.”

“As your circumstances change, you can tailor your benefits to suit you”

equiniti.com > 21

BARONESS GREENGROSS

Older and wiser Baroness Sally Greengross, OBE, was Director General of Age UK (formerly Age Concern) between 1987 and 2000, and has done a great deal to support ageing and equality in our society. In her role as President and Chief Executive of the International Longevity Centre UK, she spoke to Pádraig Floyd about the challenges facing both the UK and the wider world with ageing populations.

PORTRAIT BY ANTHONY UPTON

22 > EQ | summer 2014

PF: How do you feel the Government has responded to the issues of longevity?

BG: I’m pleased about auto-enrolment as it will increase the number of people who save into a pension pot. But there are huge challenges because we know that a lot of them will have to contribute far more than the rules require. If they don’t raise contributions enough, many people will be largely reliant on the state pension to fund their retirement. That’s not going to be a good retirement in many ways, and employers who are a trusted source of support and advice can make or break this, by helping to keep opt-out rates low and keep pension contributions high. But many firms, especially small ones who haven’t administered schemes before, are not necessarily going to be on-board from day one. A further consideration is how those individuals are going to behave when they retire; something has to be done to ensure people make the right choices about decumulation.

PF: What more needs to be done in the UK to address its impact?

BG: The population structure is very important.

We have to get more people to work beyond 65 otherwise our economic performance may stagnate. Some European countries, such as Germany, are going the other way, but we need to extend working lives. Our demographic challenges are not as bad as Japan or Germany, but there are many more old people who continue to increase in number, because medical and social care are getting better. Although the Care and Support Bill is very good, it isn’t going to deal with all of the challenges.

We need a new, integrated system, which looks at housing issues as well as health and social care. If we get housing right, we could keep more people at home and release more housing for younger people who desperately need it. Our housing is old and in many cases, damp, cold and unsuitable and so the elderly end up staying in hospital even though they don’t need to be.

BARONESS GREENGROSS

PF: What will be the impact of more people staying on later at work when we already have high levels of youth unemployment?

BG: That assumes if older people stay on in work, younger people can’t get a job. The labour market expands as is needed, and research shows increased employment amongst older people would be a good thing. Older people help to boost the national income.

Even if they’re frail, they’re part of the economy because they’re employing people to look after them.

We need more labour in the economy and older people can be a contributory factor, rather than a drain. There’s a lot of stigma attached to old age, but we’ve already seen massive change in this country in terms of other inequalities and prejudices, so we can expect age to be treated the same way.

PF: Do you think we may see increased radicalisation of different groups within society because they will be fighting for their rights?

BG: No. Some older people have young relatives – usually children or grandchildren – who aren’t going to vote to deny them rights and take the benefits all for themselves. The older generation often use their economic power or do without in order to make life better for the younger generation.

PF: Is there greater pressure on politicians to provide the kind of integrated social services that you’ve talked about, from healthcare right through to housing?

BG: That’s intergenerational, as more housing for older people means more housing is available for younger people, just by sharing it out. I don’t see any great threat of intergenerational conflict.

I think people are more sensible and much nicer than we like to think.

PF: What more should industry and Government do to promote togetherness?

BG: We need a joined-up approach. The different parts of society have got to understand the issues are now too big for one sector to deal with, so we need a collective approach – meeting the demands

24 > EQ | summer 2014

of an ageing society presents a huge challenge. We should be celebrating the fact that we can live longer, whilst tackling those huge challenges like dementia. It was admirable that the Prime Minister got the G8 focusing on dementia at the recent summit. Now we need to make sure those promises are delivered. The International Longevity Centre (ILC) is hoping to lead on how we can have a sustainable, ageing society across the globe.

PF: How well is the UK placed to manage all of this?

BG: As far as health is concerned, we’re good and in terms of longevity, there are signs that people are beginning to take it seriously and realise it is to be celebrated. We all want to live longer providing we have decent quality of life. But we must adapt to this enormous change. People don’t quite realise what changes need to be made, even to the state pension age. We’re doing well because we’re raising the pension age in line with life expectancy. Some countries are doing the reverse and that is a very short-sighted approach.

“We should be celebrating the fact that we can live longer, whilst tackling those huge challenges like dementia” PF: How important is it that Government grasp the nettle of longevity and all its influences?

BG: We can’t get longevity wrong as we don’t want those who are living longer to be shut out of society. This isn’t just the Government’s responsibility. It is up to all of us to work together to respond to these challenges and bring young and old together so that young people can identify with them more. With the technology we have access to today, it should be quite easy to achieve this.

Where we need to invest our energy is in reversing these stereotypes.

OVERSEAS PENSIONERS

Choosing the sunnier option W

ith each year international travel becomes more accessible. Budget airlines have helped to firmly establish the city-break culture and destinations further afield have opened up as flight carriers increase the ease with which we can reach far-flung places. It will therefore come as no surprise that an increasing number of Brits are choosing to retire abroad.

“Deciding to retire abroad presents quite a quandary for our clients, as the vast majority of pension schemes are sterling denominated,” explains Andy Brown, Operations Director, Equiniti Paymaster International Payments. Although a great many retirees choose to have their pension paid in sterling, despite living in a non-sterling state, this isn’t as simple as it might first seem. “It’s not as easy as it sounds,” Andy explains. “Sending a cheque isn’t very secure and is open to a high degree of risk.

“The options seem limited; either force people to keep a bank account open in the UK or offer members an individual money transfer into whichever country they live. Both of these options are fairly impractical in the long term and do present some concerns.”

However, as Andy explains, there is a third option, which is cheaper, more efficient and safer for the retiree and the business administrator.

“At Equiniti Paymaster International Payments, we pay more than 50,000 pensions overseas every month,” Andy says. “Banks do offer this service, but they charge considerably for it –

anywhere between £20 and £30, whereas we charge less than the price of a high-street sandwich.”

A currency exchange service is also something to consider, but again as Andy explains it will come with hidden costs: “If the member was to use a currency exchange – a money wire service like Travelex or Western Union – this is likely to involve partner or correspondent banks, each of which is entitled to apply a ‘lifting fee’. These are hidden costs that you can do nothing about and must be settled by the remitting bank.”

Lifting fees are often something that the pensioner is unaware of, but can be mitigated in the interest of the customer.

“For a long time, we have managed payments beyond pensioner payroll, such as accounts payable, and if there were hidden fees there, it would greatly damage customer relationships,” Andy says.

“But lifting fees can be avoided by using an automated clearing house (ACH). An ACH does not apply these charges and payments move straight into a country’s clearing system. These payments are automatic and electronic – otherwise referred to as BACS payments in the UK. They are high volume and low cost, which is why we can charge as little as £2.75 per transaction,” explains Andy.

Equiniti Paymaster International Payments has a relationship with Citi and is able to take advantage of its network of 130 countries. “The most common currencies we make payments to are the euro, US, Canadian, Australian and New Zealand dollars and the South African rand. There are also quite a few exotic

GETTY IMAGES

Regardless of euros, dollars or rand, Equiniti Paymaster can get pensioners their retirement money without the hefty charges

locations that we transfer money to,” says Andy.

So there is a way that pensioners can get access to their money faster, more securely and without paying huge fees, regardless of where they choose to retire, and that service is with Equiniti Paymaster.

For more information contact Paymaster International Payments on: 01293 604567 or email enquiries@equiniti.com

:: WHERE IN THE WORLD? Asides from Europe and the USA, Equiniti Paymaster International also regularly sends payments to the following exotic locations: B E L I Z E - - - - - - - - - - - - - - - - C A P E - V E R D E - - - - - - - - - - - - C O L OMB I A - - - - - - - - - - - - - - C O S T A - R I C A - - - - - - - - - - - - F I J I - - - - - - - - - - - - - - - - - - G R E N A D A - - - - - - - - - - - - - - - G U Y A N A - - - - - - - - - - - - - - - - I S R A E L - - - - - - - - - - - - - - - - N E P A L - - - - - - - - - - - - - - - - - OMA N - - - - - - - - - - - - - - - - - - P E R U - - - - - - - - - - - - - - - - - - S I E R R A - L E O N E - - - - - - - - - - S T - K I T T S - & - N E V I S - - - - - - S T - L U C I A - - - - - - - - - - - - - - S T - V I N C E N T - & - G R E N A D I N E S V A N U A T U - - - - - - - - - - - - - - - -

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SIX STEPS TO ...

MUTUALISATION Recent research has highlighted that successful business mutuals tend to outperform their competitors. As Government looks at ways to cut costs within the public sector, we are likely to see more joint ventures and mutuals, especially when you consider the success of MyCSP, a joint venture between Equiniti Paymaster, Government and MyCSP employees.

Sharon Crosland, Head of Corporate Affairs, was a key part of the MyCSP mutual joint venture process. She takes EQ through her six steps to successful mutualisation.

2 3 1

UNDERSTAND YOUR DRIVERS

Before you embark on mutualisation, you need to have thought very carefully about why you want to do this and what is driving this change. Whether it is budget cuts or a major service challenge, you should understand fully why mutualisation is the best model for your business before you proceed. Having a firm idea of what is prompting the change will prove to be invaluable when you present your business case to your stakeholders.

26 > EQ | summer 2014

IDENTIFY YOUR STAKEHOLDERS

BE A GOOD COMMUNICATOR

Establish who needs to be involved in the process: who has an interest in your service/ business? Depending on what sector you are in, this could have a much wider reach than just your management team and employees, especially if you represent the public sector. Think about your customers or service users too.

Once you know who needs to be involved, you can then get an impression of whether or not they are likely to be supportive of the change. But to action change, gaining support from your stakeholders is critical.

Communication is key. You must engage with your people; talk to employees in the organisation, understand their attitudes and how they feel about things.

Discuss what is going to be difficult and what is going to be easy and consult with them about what they think is best for the business. It’s also important to apply the same principles to your customers and stakeholders. They too should be kept thoroughly informed about what is going on.

You’ll also get a range of different perspectives and some good ideas too!

For more information about MyCSP’s products and services, please contact Virginia Burke on 0743 627 0137.

The Cabinet Office’s Mutuals Information Service also has a very helpful route map. For more information, please visit mutuals.cabinetoffice.gov.uk

5 4 6 Ensuring you have a firm grip on your finances is an essential part of executing a successful mutualisation. You should know what your business costs are, what the revenue currently is and what the potential revenue could be if the organisation is mutualised.

You should also consider your assets – things like buildings and machinery – skills and capabilities and cash flow. These should all be considered before any decisions are made. If you are entering a competitive market with plans to grow, you need to understand your market and the competition.

What can you offer that is distinctive and compelling for potential customers?

You should decide whether this is going to be a joint venture either with a commercial partner or with a customer or a fully employeeowned business. A joint venture involves two or more parties that have a vested interest in the business working in partnership to build a profitable business, whereas a mutual model does not seek the support of external stakeholders to buy shares.

Instead its employees hold the shares and decision-making powers. The model you choose should be the one that best suits your needs and the benefits you set out to gain from mutualisation in the first place. Once this has been established you then need to decide on your legal model and make sure your contracts and commercials are in place so that the business can operate successfully.

ALIGN YOUR OBJECTIVES You will know you have a good mutualisation model when all of your partners are fully engaged and you have aligned all of your aspirations and goals for the company with your shareholders and stakeholders. A robust business plan for the future is key. Employees should be really engaged in the business and driving innovation. You also want to see growth within the business and deliver a profit for your shareholders or the community if you go down the community interest company route. Research has shown that mutuals tend to outperform their rivals, so service excellence, profitability and employee satisfaction should be key benefits of adopting a mutual model.

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GET THE COMMERCIALS RIGHT

CONSIDER YOUR MODEL

AS I SEE IT

A TICKING

TIME BOMB Brian Please, Business Development Director for Equiniti Paymaster, discusses the future of annuities and what can be done to ensure people get the most out of their retirement

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t was announced in the recent Budget that from 2015 people will have the freedom to do what they want with their defined contribution pensions and will not be required to buy an annuity. The Chancellor was absolutely right in terms of the importance and potential for individuals to get more out of their pension savings.

I only worry that the headline-grabbing message of damning annuities, whilst having the impact he was after, undermines the unique value annuities will always have in the right situations.

The current generation approaching retirement age is in a transitional phase. People will receive their state pension much later on in life as the state retirement age rises. They will have a reasonable amount from final-salary pensions, but the majority of those pension schemes are now closed and their defined contribution pensions will not be enough to make up the shortfall. People were expected to retire for only 5-10 years a generation ago, but as life expectancy increases, this has now risen to 30 years.

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The outlook for future generations is bleaker. They will have no final-salary pensions, the current level of state pension cannot be relied upon, and unless they save materially through autoenrolment and other savings, they will not have enough money to retire. The bomb is ticking, and as time goes on, the problems will become more compounded with each generation.

Annuities have their challenges: what you can buy with an annuity today is much less than before, and each group of people will find it harder to generate enough income to support their whole retirement. Buying an annuity is a one-off, irreversible decision, but there are a few small, simple steps those approaching retirement can take to help.

A most fundamental question relative to this needs to be asked: when should I and can I afford to retire? It is assumed that people will buy an annuity when they reach the age of 60 or 65, but what if they decide to work for longer? People are being compelled to buy an annuity whether they are ready or not. Every year

they defer their retirement, the better the annuity rates are that they are entitled to.

Having planned for retirement, people need to shop around to get the best-value annuity; it’s an open market and people are not necessarily offered the best rates from their own pension providers. It’s also important to actively seek out information and advice. The Association of British Insurers states that six months before a person is due to retire, a wake-up pack should be sent out. This is far too late, and the process needs to begin at least five years before retirement so people are planning for their futures.

People usually purchase a standard, single-life annuity but those products don’t take inflation into account, don’t include death benefits and ignore their spouse. People should also consider enhanced annuities over a standard annuity where they may be entitled. If someone has a medical condition, for example, which means their life expectancy is lower than average, then they can get a significantly higher income from their annuity.

:: PENSIONS ARE ALL CHANGE

Pádraig Floyd looks at the recent pension changes

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Although there is one more Budget to come before the next general election, it is unlikely to be as radical as this year’s Budget. Osborne promised to remove all restrictions on how pension funds are taken at retirement, and the reforms proposed by the Chancellor will have a considerable impact on the pensions industry.

“The headlinegrabbing message of damning annuities undermines the unique value they will always have”

The issue with annuities is that they are rigid products, which becomes difficult later in life if a person becomes ill and needs long-term care. You find people selling their houses or at least releasing equity in their property, which may have been their children’s inheritance, to fund their long-term care. It’s a huge social challenge, and annuities may need to become more flexible to help people adapt and cope in that scenario.

For future generations, I think financial education will be key. They need to see the value of saving and investing, whether this is for a pension, an ISA or property, and their expectations about when they can retire and the lifestyle they can afford will also need to be managed.

Yet, despite these issues, annuities are good products. There is no other product that delivers a guaranteed income for life.

If annuities become more flexible and people become more aware of the type of annuity they could buy and invest more time in researching the best rates, there are products that are fit for purpose for the foreseeable future.

Even though the minimum age at which a defined contribution (DC) scheme member can take their pension will rise from 55 to 57 in 2028, those with DC schemes will have greater access to their pensions. They will be able to take their pension fund as a lump sum, drawdown or annuity, and the pension commencement lump sum or tax-free cash will still be available up to 25%.

As the Budget allows the total fund to be taken as cash, the rate of taxation will be at the member’s marginal rate rather than the punitive 55% rate it is currently set at.

Other changes include the lowering of the guaranteed income requirement for flexible drawdown to £12,000, from £20,000. Capped drawdown limits will also increase from 120% to 150% of Government Actuary Department’s (GAD) rates. Those with single small pension pots will now be able to take up to three as cash lump sums (previously two) from the age of 60 up to the value of £10,000 each (previously £2,000). Trivial commutation limits also increase to £30,000 from £18,000.

Andy Robins, Head of Implementation at Equiniti, says: “Access to small pots will increase the demands of scheme administration and may introduce some degree of risk. Knowing your scheme’s regulatory requirements and having a robust communication structure in place for every stage will be essential to maintain both good relations with members seeking transfers and high levels of governance.” equiniti.com > 29

CONTRACTING OUT

The end is nigh Paul Mead, Account Director at Equiniti Paymaster, discusses the demise of contracting-out

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he demise of contracting-out will be with us sooner than anticipated. The DWP’s white paper single tier pension – a simple foundation for saving – suggested that abolition could be with us as early as April 2016. The Pensions Act 2014 received Royal Assent on 14 May 2014 and this is now law. The contracting-out status will cease for defined benefit (DB) schemes a full 12 months earlier than was previously scheduled.

Although you may welcome the end of contracting-out, trustees will have a great deal of work to do in advance of this, as they will be expected to ensure the guaranteed minimum pension (GMP) data they hold is accurate before contracting-out ends. This is no mean feat and considering the goal posts have been moved in regards to timescales, time is not on the side of trustees of contracted-out DB schemes.

This is important for a very straightforward reason. When a scheme is contracted-out of the second part of the State Earnings Related Pension Scheme (SERPS) it has to provide a certain minimum level of pension benefits, known as the GMP. GMP reconciliation is the process used to ensure the scheme records agree with those of the National Insurance Contributions Office (NICO, which is part of HMRC). This enables a scheme to consider its data as clean and entirely reliable.

GMPs are typically reconciled on an individual basis at crystallisation events. These include GMP retirement age, death, transfer-out or on a bulk basis, which is when schemes go to buy-out.

In the near future, NICO will offer a scheme reconciliation service. This will assist trustees in reconciling their records for all non-active members. However, this will create a bottleneck, as all contracted-out DB schemes must do this.

The GMP reconciliation process is very complex, and as a result, it can typically take up to two years or more to complete. It is therefore advisable for schemes to verify their GMPs at the earliest opportunity.

Although consultation around how schemes should deal with GMPs is ongoing, now is the time to talk to your administrator and discuss how they could support you throughout this process.

We recommend clients begin the project as soon

as possible, so as to take advantage of the NICO reconciliation service. You should also be sure to check that your preferred supplier has relevant experience in GMPs. You should establish costs for each distinct phase of the project and keep a close eye on it. Work in partnership with your supplier on this and as a first step, ask for their thoughts on the project risks.

Time must be invested to ensure that you have documented the contracted-out history of your scheme. It is worth bearing in mind that if your company has been subject to a number of mergers and acquisitions, this could create quite a complicated picture of your organisation.

The amount of work involved will depend on the quality of past record-keeping. A good investment of time would be to determine the best reconciliation strategy to adopt – which should include the tolerances that might be used – if or when your data differs from the NICO’s. This could potentially reduce the level of work and have a huge impact on the overall cost of the project.

For more information contact our GMP experts on: 01189 513815 or email stewart.winter@ equiniti.com

:: THE PROS OF GMP RECONCILIATION

Carrying out the GMP reconciliation process is advantageous as it enables a scheme to: comply with the regulator’s data quality checking requirements ensure members’ benefits are accurate provide far more accurate actuarial valuations access more favourable buy-out terms accurately record the scheme’s liabilities increase administration efficiencies ensure payment or recovery of missed or overpaid State Scheme Premiums (SSPs) avoid incorrect benefits being paid out from the scheme conduct any future GMP equalisation exercises from accurate records.

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ARTIFICIAL INTELLIGENCE

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nformation is streaming into businesses, all day, every day and in ever increasing volumes.

It fills our office spaces and our hard drives, arriving through a growing number of channels – both real and virtual. It floods into our email inboxes and piles in through our letterboxes – mixed-up, messy and unstructured. And for many businesses it is expensive and time-consuming to deal with.

Hard copy documents are still being used by many customers, while the ease and inexpense of digital communication have increased the number of interactions. This multitude of communications channels is making it hard for businesses to keep pace with their customers and clients, and can increase errors, cycle times and costs.

Simply throwing more people at the task is not a feasible long-term solution, so businesses must look to more intelligent processes, systems and software to

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improve customer service and compliance, and reduce costs and mistakes.

Equiniti has been working with the team behind one such system – inSTREAM by Celaton, which uses artificial intelligence (AI) to streamline labour intensive clerical tasks and decision-making. inSTREAM is a great example of a new generation of software changing business methods and offering new business process outsourcing opportunities.

Celaton was born in 2004, a result of a management buyout of Redrock Software from Netstore Plc and the acquisition of DG Tech. But its history goes back to 1993. Chief Executive Officer, Andrew Anderson – a former paratrooper – says their inSTREAM software as a service can transform the way enterprises handle unstructured content flowing into organisations through different channels, including financial and non-financial information received by email, fax, post and paper.

The

ART OF

SMART Can artificial intelligence manage your information overload?

PORTRAIT BY ANTHONY UPTON

“It enables scale and efficiencies that were previously out of reach and minimises the need for human intervention, ensuring that only accurate information enters the line of business systems,” says Andrew. “What I learned in more than 20 years in the IT industry is that it’s all very well delivering IT as a service but the real pressure comes from organisations’ ability to provide a customer with the right experience, including the convenience and the choice for them to be able to communicate how they want. That is often stuff that comes in by paper, and is slowly being taken over by email. All this material is really unstructured and very, very labour-intensive to process. So what Celaton really focused on was how can we apply AI to make the process more efficient?

And cut out the errors and the labour – the human element – where possible.

“We spent the first six to seven years developing this technology which could understand any media

in any format – creating a single channel. With inSTREAM the objective is not only to recognise it by reading it, but to understand what it means. The system is actually making decisions by recognising and extracting important information, verifying and checking it against other information and delivering it into the right business system.”

The system has the ability to learn the patterns and processes like any new employee would. To begin with it may need to flag up when it doesn’t recognise what it is dealing with and will require direction from a person, but as it processes more, it learns more, and will require fewer interventions. It relies on the ability to recognise patterns, rather than just words and phrases, and learns autonomously to match hundreds or thousands of relevant reference points to achieve the level of confidence required.

Andrew adds: “It’s important to visualise what AI can do and so we do a simple demonstration to

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ARTIFICIAL INTELLIGENCE

show how inSTREAM has learned to understand the meaning of content. Using a smartphone, we photograph some articles from a newspaper and email them to inSTREAM and it can tell us what they mean. It can do this because it’s already read thousands of articles like them before on the BBC News website. News articles fit into categories like politics, health, sport, entertainment or crime and by reading thousands of these, inSTREAM has learned to recognise the pattern of each article and categorise them. And it can do hundreds of these every minute.

“But when it sees something it is not 100% confident of or it hasn’t seen before – for example, a cooking story – it will then present it to someone on a screen and say, ‘I don’t know where this fits’. Someone will tell it, ‘This is a cookery story,’ and inSTREAM begins to learn that there is a new pattern and it has a new category name. The same technology can be used to identify different correspondence such as complaints and then to work out how to deal with them.”

Human intervention is still required in the automated process but the dependency on humans is minimised to dealing only with exceptions, and the impact of losing experienced people, or sickness or inconsistent performance is reduced.

The inSTREAM system is already in use by customers including Carphone Warehouse, Kuoni and Davies Group. For travel firm Kuoni, inSTREAM receives over 15,000 tour documents per day from 185 countries and in 40 different languages. Processing all of this information used to require 60 people. It now requires six, despite the fact that volumes have increased by 50% in the last few years.

Mark Tabone, Director, Products and Services for Equiniti, says: “Business Process Outsourcing (BPO) is becoming more industry specific. What now differentiates service providers is the ability to articulate big ideas. To take financial services as an example, the majority of the large UK clearing banks are wrestling with their costing ratios. Aligned with that you’ve got the new entrants to the market, which are concentrating on products and marketing but don’t necessarily want to carry the fixed cost assets or middle and back office. Clearing banks want to cut their cost base and that’s where we see innovation like inSTREAM playing a massive part. The 34 > EQ | summer 2014

“We photograph some articles from a newspaper and email them to inSTREAM and it can tell us what they mean. It can do this because it’s already read thousands of articles like them before”

service providers that can make big dents in banks’ improvement programmes will be the ones that get round the table and work with them.

“Identifying and triaging documents to the correct work queue, as they arrive, is critical to efficiently starting the inbound workflow process and will allow Equiniti to differentiate itself by way of speed and service level agreement (SLA) achievement.”

The Royal Mail Initial Public Offering (IPO), handled last year by Equiniti, was indicative of the changing nature of communication as the first significant retail IPO in the digital age. Much of it was handled through portals.

“At one point we were taking 6,000 applications a minute via portals,” says Mark. “That doesn’t necessarily change the back office stuff that still needs to be reconciled. It’s just data in a different form and I see inSTREAM being very useful for that. We touch 30 million of the UK population every year and also receive 250,000 notifications of death each year with people needing to be matched with unclaimed assets, so we receive lots of paper and variable media correspondence. So, again, automation and intelligent technology could be a big winner for our customers.”

For more information on inSTREAM visit www. celaton.com/instream or contact Mark Tabone on (0)207 469 1915 or email Mark.Tabone@Equiniti.com

DATA MINING

Big data, big impact With 294 billion emails being sent every day, the data available to us is daunting. The big question is what to do with it all and that’s where Equiniti Data Services comes in

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he enormous amount of data now available about all of us means that organisations know us better than ever. And for businesses, this information provides a range of unique opportunities.

A case in point is the text messages we receive from our mobile phone network provider, alerting us to promotions on products that we buy, available in the shop we most frequently buy them from. This is far from a coincidence.

“There is a raft of information out there, far more information than companies themselves hold. But if they are able to harness that data through what we do, then it can add real value,” explains Duncan Stevens, Managing Director of Equiniti Data Services.

The data that Duncan and his team can provide clients with is beneficial for a number of reasons. “If we look at preventative measures, the sort of data we have access to can reveal causes for concern,” Duncan explains. “For example, if we know that someone earns a fairly modest salary and yet lives in a mansion, we could potentially be looking at some fraudulent activity, so it can throw up anomalies that the client isn’t aware of.

“Similarly, we can use the data to help organisations to build a better profile of their customers. If our resources reveal that an individual shops with one of our client’s competitors, then we can pass that information on so that our client can make contact with a potential customer.

So whether it’s used as a preventative

measure or a proactive one, it’s incredibly useful,” Duncan says.

Pinpointing the exact data a customer needs can be time-consuming if it isn’t handled by a professional who knows what they are doing. “Equiniti Data Services offers data mining, which allows us to sift through the masses of data available to locate key information for our clients,” Duncan says. “We also offer a data cleansing service. This is of particular use to organisations that, by nature, don’t often communicate with their clients. We can check to make sure the details the company holds on their client are still correct, and if not we can change them. So it’s really about making sure the data is up to date and accurate.”

The value in having professionals to interpret this data is paramount if a business wants to get the most out of the information available.

“If you took all of the information that exists in the world today and copied it onto DVD-roms, you would be able to pile them on top of each other in five separate stacks, and each stack would reach the moon and back again. And that figure is set to grow by 4,300% in the next six years. This is why we are offering this new service to our clients – we can get them the data they need, when they need it, and before the next tide of information rolls in,” says Duncan.

For more information please contact Duncan Stevens on 07843 228988 or email Duncan.Stevens@equiniti.com

:: CRUNCHING THE NUMBERS

# 90% of the data recorded in the history of mankind has been collected in the last two years, according to IBM. # About 70% of all data currently generated comes from individuals, not corporations. # It is estimated that between now and 2020 the annual volume of data generated will increase by 4,300%. # An estimated 10 billion mobile devices will be in use by 2020. # 294 billion emails are sent every day.

# There are over 1 billion Google searches every day. # A 2013 Cushman and Wakefield report ranked the UK as the most developed online retail market in the world.

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PSYCHOLOGY OF SOCIAL MEDIA

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he benefits of businesses using social media are numerous: building a customer portfolio, attracting new business and increasing awareness of your products to name but a few. But what can businesses do to maximise those benefits?

Studies in social media psychology are becoming increasingly extensive and businesses can learn from this research to ensure their social media strategy is reaching its full potential.

“Businesses should view social media as a communication and listening tool,” says Dr Pamela Rutledge, Director of the Media Psychology Research Centre in Boston. “Any type of business that uses

Understanding how people use social media can help businesses get more from their online presence. EQ investigates the psychology of social media

Share and share social media should start with a mission statement about why we are doing this and that should drive strategy. When you are creating messages that move across media, it is very helpful to think of your business as an archetype. Are you wise or are you the hero like Nike? What is the core story that you are telling?”

As much as a business should have a clear understanding of what they are trying to achieve with their social media presence, it is also useful for a business to know why their customers are using social media. “The boundaries between the professional, the personal and the socialisation aspects are blurred when it comes to social media. You manage and satisfy different needs at different moments on different platforms,” explains Dr Sharon Coen, who is a Senior Lecturer in Media Psychology at the University of Salford. “It is, however, possible to identify common values that are driving the adoption of social media. A recent study conducted with Taiwanese 36 > EQ | summer 2014

students identified the need for belonging, hedonism, self-esteem and reciprocity.”

Sharon continues to explain that belonging is feeling part of a community; hedonism is the way social media can entertain people; users liking your status or sharing your content can boost your self-esteem; and reciprocity is the possibility of interacting and building existing or new relationships. With this in mind, how should businesses interact with their customers online?

Sharon and Pamela both highlight the human side to social media and agree that businesses need to provide a more personal type of communication. “I spend a lot of time working with businesses helping them to develop a customer persona, so how does it feel to be that person? It is about engaging with people in a conversational way,” continues Pamela.

“Those businesses that are staying out front in the market are the ones that are really listening to their customers as human beings. What are their needs and goals?

Putting people in the picture In a technology-driven world, it’s easy to forget the most important truth about social media: people engagement.

Successful social media strategies put people at their heart. Understanding people’s different personas helps to create more engaging online content. This is why the new Equiniti.com website centres around conversational articles about the things that matter to our audiences.

Kevin Mann is a digital marketing expert who helped to create the new Equiniti.com website: uk.linkedin.com/in/kevincmann/

a like :: WHICH PERSONA ARE YOU? The Customer Insight Group of the New York Times researched what motivates people to share content online. From their research, they came up with six personas of online sharers.

Altruists, who are reliable and thoughtful in nature, are more likely to use email to share content that their friends will find helpful.

Careerists are more likely to use LinkedIn and they share valuable, intelligent content to network.

Hipsters are less likely to use email, and they share content that is creative, cutting-edge and projects their identity.

Boomerangs use Twitter and Facebook to share content to get a reaction from people. This makes them feel empowered and validated.

Connectors are creative, relaxed and thoughtful, and use email and Facebook for making plans.

Selectives, who are thoughtful and resourceful, use email to carefully share content that is informative.

Customers expect validation of their voice.”

Interactivity is also key as people are motivated to connect with each other on social media. “There should be plenty of opportunities for the user to both interact with the business, but also amongst themselves to create a community,” says Sharon. “There are little tricks one can use to force more engagement. For example, a study has shown that people are more likely to click on a link on Twitter if it is preceded by a question.”

Businesses also need to ensure that their content is relevant, engaging and valuable to their audience as studies have indicated that people share content to manage their identity. When sharing content, they also think about what their Facebook friends or Twitter followers will appreciate and find most interesting. “People use social media strategically to present a certain image of themselves,” says Sharon. “They are more likely to share information which enables them to say something about who they are and what they stand for. It’s so important to understand your audience as you can produce content that appeals to them.”

There has already been a shift away from advertisers using highly commercialised online advertising to using content marketing – for example, embedding a product in an interesting news story. “Social media users are no longer simple consumers,” says Sharon.

“In the future, successful businesses will be the ones that embrace a more interactive and collaborative relationship with the public.”

Pamela believes social media will become increasingly fluid with more mobile technology and customers will gain another level of control. “It’s very important that businesses transition from a top-down point of view where they control messages both internally and externally to one that recognises people expect to be more collaborative and participatory,” says Pamela. “I think businesses are thinking of social media as a marketing department but they really need to think of themselves as a social organisation. That doesn’t mean there isn’t a boss. It just means you have a different attitude about what you are doing.” equiniti.com > 37

FAIR DEAL REGULATIONS

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he long-awaited Fair Deal regulations were announced by the Treasury in October 2013, and although they may lack initial detail, they have received a warm welcome from contractors, unions and individuals, as they are designed to reduce pension burdens and increase competition among public sector service providers.

The rules govern the treatment of pensions for staff who are given access to their old public sector scheme when they are compulsorily transferred into the private sector. These represent a considerable easing of the previous Fair Deal and set out the Government’s pension requirements for private sector contractors that take on either: • First-generation contracts: those where public sector workers are being outsourced to the private sector for the first time; or • Second-generation contracts: where former public sector workers are employed by an incumbent contractor, these workers having already been outsourced to the private sector.

The previous position required a private sector contractor to set up a broadly comparable defined benefit pension scheme to the Principal Civil Service Pension Scheme (PCSPS), and National Health Service Pension Scheme (NHSPS) or other unfunded arrangement. This was designed to provide similar benefits to those previously accrued in the public sector scheme.

First-generation contracts

Now, workers will stay in their current public sector scheme, provided a minimum of 50% of their time is spent on the contract services. Private sector employers will effectively be admitted into the public sector scheme, and become a participating employer. Their contribution rate is intended to be the same as for existing public sector employers – currently 14% of pensionable pay for the PCSPS – though much lower than typically applies in a private sector scheme. There will be no need for bulk transfer, nor will there be any deficit at the end of the contract.

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A FAIR This is a very welcome development for many private sector contractors as they will not have to concern themselves with the new defined benefit (DB) liabilities, pension deficits and future bulk transfer value issues or end of contract shortfalls.

During the course of a contract, the cost of providing DB will be more or less fixed, with the difference being the contribution rate subject to review at subsequent actuarial valuations of the relevant public sector scheme. However, this removes much of the uncertainty and all of the volatility.

Second-generation transfers

The major difference here is that at the end of the contract, the default option will be for individuals to transfer back to the public sector scheme, provided they meet the same 50% contract time requirement. The member will join the section of the scheme that they would have been in had they remained in the public sector.

The broadly comparable scheme will only be an option in certain exceptional circumstances.

The employer will have to effect a

Private sector contractors welcomed the new Fair Deal, as it should remove some of the risk and uncertainty from contract negotiations

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DEAL bulk transfer into public sector pension arrangements for those members who consent to transfer their past service rights. Only active members will transfer back, with the contractor keeping deferred members and pensioners.

The main concern for an incumbent contractor will be the bulk transfer, irrespective of whether it retains the contract when it is re-tendered. If the broadly comparable scheme was underfunded, this would require top-up payments to be made. However, the contractor won’t be liable for any further pension liabilities at the end of the contract.

Uncertain times

It is not clear what assumptions would be used to calculate a bulk transfer, particularly where the exit terms are unclear, though this lack of clarity is the norm rather than the exception.

Uncertainty also exists in relation to contracts first outsourced before the old

Competition looks set to increase as contractors, unions and individuals welcome the Fair Deal regulations

Fair Deal applied. Though moving back to the public sector is the default position, it is not clear how any exceptions will be agreed.

The current guidance states that existing contracts will continue with the current pension arrangements until contract renewal. Whether an employer could request that employees are allowed back into the public sector scheme midcontract is not totally clear, and we await further developments on this front.

Private sector contractors welcomed the new Fair Deal, as it should remove some of the risk and uncertainty from contract negotiations. This will help to create a more level playing field.

Know where you stand

Although these rules are not yet fully in force, they must be applied to every contract from April 2015, so employers should start to familiarise themselves with the implications now.

The PCSPS has already implemented

the new Fair Deal and the NHSPS is expected to follow in the near future.

The Local Government Pension Scheme (LGPS) already allows private sector employers to become an admitted body, but it remains to be seen whether this will be mandated in the future.

The Government has an objective of increasing the number of service providers to the public sector, and is particularly keen to encourage smaller employers, who previously felt excluded by onerous pension obligations.

Detail on the new guidance can be found on the Government website: www.bit.ly/fairdealguide

If you would like more information, please email: fairdeal@equiniti.com

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OUTSOURCING LEGACY ACCOUNTS

Leaving a legacy isn’t necessarily a good thing. Brett Jesson, Business Development – Financial Services at Equiniti, tells EQ what banks can do to tackle legacy accounts

What is a legacy account?

To put it simply, a legacy account is one that is no longer open to new business. Some of these accounts are closed whilst others are in run-off mode with the account holders paying off any outstanding balances. Legacy accounts result from the sale of a particular product line or lines, which may have become unprofitable or redundant to the business. In many cases, banks have sold off portfolios, but it is only the active accounts that are transferred and the legacy accounts remain the responsibility of the original lender, who must legally continue to service their former customers.

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LEAVING AN UNWANTED

LEGACY Why do banks have to maintain legacy accounts?

Banks have a legal requirement to retain and maintain records for at least six years. The time limit for taking legal action against a bank because of a problem with an account is six years. Under the Money Laundering Regulations, banks and building societies must retain records of accounts for at least five years from the date the account was closed. A protocol between the Information Commissioner and credit card reference agencies also states that agencies should hold data for six years.

Why has the number of legacy portfolios increased over the last 10 years?

It’s a combination of factors.

Legacy accounts for credit card issuers have become particularly problematic over recent years. In 2008, there were 65.9 million credit cards in issue in the UK. By 2011, this had fallen to 54.5 million, so, in only three years, millions of credit cards had been withdrawn from issue. Credit card issuers also used a number of different brands; there were more than 1,300 different credit card brands in circulation in 2009. In an effort to realign their products, issuers have tried to limit the number of credit card brands they have. This combined with the trend of consumers transferring debt to interest-free cards has left a buildup of closed accounts that must continue to be maintained.

What problems do the accounts cause for banks?

Legacy accounts simply add no value to a business. It may take decades from an accounts portfolio being closed to new business to the closure of final liabilities. They are a drain on resources, time and money, and will never offer a profitable return.

Not only are servicing costs for the administration systems very high, but the systems managing the legacy accounts are usually outdated or there are multiple, inefficient systems in place.

Managing the legacy portfolios also takes up the time of trained staff, whose time would no doubt be better spent elsewhere.

Why is it important for banks to concentrate on their core activities?

Banks essentially have three main core activities: taking highly liquid deposits as capital, extending short-, medium- and long-term credit, and providing a payments system. Each of these activities is demanding and uses up resources yet they are central to a bank’s operations and generate profit.

Banks are realising that they need to concentrate on their core activities to ensure they are competitive. In many instances, credit card issuing is no longer part of their strategy or individual brands may no longer fit in with their target market. Maintaining legacy accounts is a non-core activity, and distracts from the activities that add value.

What should banks consider when deciding to retain or outsource legacy accounts?

Banks usually have three options when it comes to their non-core activities: sale, retention (for legacy accounts this means running off liabilities to conclusion) or outsource. Selling and retention are both often unrealistic given the current market conditions. Banks have limited opportunities to sell the accounts and it can be difficult to find a buyer who is willing to take on such a burden. When banks are deciding whether to maintain or outsource a legacy portfolio in particular, they need to ask a number of questions: Do we have the resources to manage the legacy accounts? Does the legacy portfolio have special requirements that mean it has to remain in-house? Is it cheaper for us to do the work?

It is highly unlikely that banks would answer yes to any of these questions.

What are the benefits of outsourcing legacy accounts?

The biggest is cost. It typically costs 20% less to outsource noncore activities than to do them in-house. Even as banks decrease the number of legacy accounts they have on their systems, the fixed costs for maintaining the accounts remains the same, thus increasing the unit cost of each account overall. For an outsourcing company, its unit costs are relatively cheap as it works for a number of clients. As well as lowering costs, there are many other benefits to outsourcing noncore activities. It allows banks to focus on their core activities and what they do best. Outsourcers offer a very high level of service, and give banks access to efficient IT systems without banks having to replace their own equipment.

Data is then brought together onto a single system, which is easier to manage, and the bank’s most skilled staff can concentrate on more valuable activities.

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