Employers need to invest in the provision of financial education and advice for their staff, says Swewart Hastie.
The advantages of offering this as a benefit for employees are clear, it will improve workforce productivity, retain much needed talent and bring employer brand benefits.
Travel, health and income protection insurance are already commonplace when it comes to benefits. And it seems obvious to me that as the options around pensions have changed the need for staff financial education is greater than ever.
Employees need support to understand which options are best for them to accumulate and access pensions and other savings.
And access to financial education and appropriate advice should be viewed as a valuable and essential part of the employee benefits package.
The imperative to act now comes on two fronts. The success of auto-enrolment means there are more employees in pension schemes than ever before, while the seismic shift sparked by the pension freedoms, introduced by the government, has created a bewildering new landscape of options and decisions.
On top of this workers have to contend with recent changes to pensions taxation and the real possibility that tax relief will disappear altogether.
Staff will rightly be asking: “How do I decide where best to allocate my benefits when presented with various options, from share plans and pensions, to flexible benefits?” And that’s before we consider ISAs.
There is a real need for financial education, rather than information, on the options available. You wouldn’t expect a young child to learn to read fluently by just handing them a book.
To get the best out of their own reward package, employers need to help staff consider the options to spend and save smarter in the context of their individual circumstances, which includes thinking about where they are in their personal life journey.
One cost-effective solution would be to offer employees online profiling and modelling tools. Smart profiling tools can help employees identify which options are most relevant to them.
Modelling tools allow them to see how the financial decisions they make today will impact their long-term savings and financial freedom.
A particularly acute need is for individuals approaching retirement who will be accessing the new freedoms for the first time. Don't assume this group won't use online tools, Office for National Statistics figures suggest that 80 per cent of 55 to 64 year olds have internet access.
And our recent straw poll revealed that 29 per cent of employers and trustees with defined benefit pension schemes plan to provide online modelling tools.
Additionally, the poll revealed a similar proportion expect to provide subsidised or paid-for independent financial advice to members as they approach retirement.
There are recruitment and retention benefits for employers in providing financial advice as a benefit and research from Standard Life found that 75 per cent of employees would value more support from their employer on financial planning.
Increasingly it is also seen as corporate brand enhancer.
I think there is a real opportunity for employers to champion financial education, and help employees understand their options in a more personable, relatable context.
It will unlock value for employees and ultimately for the employer in the longer term.
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