Saga has made changes to its defined-benefit pension scheme to contain costs and tackle the scheme’s deficit while keeping it open to both existing and new members for the long term. The company has also improved the terms of its group personal pension. These changes have been informed by the company’s strategy of helping customers and employees lead better lives in retirement. At the same time, the company has facilitated access to other financial products to support staff in managing savings priorities and is helping staff to make more informed decisions when it comes to saving for the future.
THE NEED FOR CHANGE
Saga is a provider of holidays, financial products and care services aimed at the over-50s. The company, which has more than 4,000 staff in the UK, has long offered a defined-benefit (DB) scheme, the Saga Pension Scheme (SPS), to all its permanent employees and just under half (48%) of the workforce are members. It applies its strategy, of helping people to ‘lead better lives in retirement’, to its employees as well as its customers and regards its pension provision as integral to this. The company also considers a DB pension scheme to be an attractive proposition in recruiting and retaining staff when many other companies are closing theirs.
However, in the two years from January 2014 to January 2016 the actuarial valuation of the DB scheme deficit – the gap between the value of investments and what it has to pay out in current and future benefits – had increased from £15.6 million to a forecast £50 million, while the total cost of future benefits had risen from 18.6% to over 30% of pensionable salaries. Saga therefore had to consider whether it could afford to keep the defined benefit scheme open.