Saving more now could make a real difference to the lives of your employees, but is it something that business should be meddling in? Is now the time to start thinking about incentivising financial planning? Surely, someone’s own nest egg, or lack of nest egg, is their problem? That is one view. Another is that with the state pension moving from 67 to 68 between 2037 and 2039, seven years ahead of the date range originally planned, now could be the time to start taking the idea of financial education, guidance and advice in the workplace seriously.

Incentivising financial planning 

You might be more at home providing an incentive for a sales initiative, but getting employees to feel comfortable about their future and confident in what they need to be doing to provide for themselves as they age is one of the best things you can do. Not only will this spur on intrinsic motivation – working because it matters, but it will also help you know that you are on track with your salaries, bonuses and investments. Providing not only great comms and resources but also a strategy to ensure people have investigated their options shows that you care. Whether you give a tangible incentive – a token reward or gift, or give time to assess options or bring in an advisor, incentivising financial planning could be a great move to show that you really care about the wellbeing of your workforce.

“Future generations really need to think about how they are going to fund their retirement”

“It might seem a long way off but future generations really need to think about how they are going to fund their retirement as early as possible, to get a better understanding of what they need to be doing now.” Jonathan Watts-Lay, Director, WEALTH at work, a leading provider of financial education, guidance and advice in the workplace, comments

“Saving more now or working longer than planned could make a real difference and the value of well thought out planning from early on should not be underestimated.”

Craig Mackinlay also thinks that there is a real area of confusion around finances.

“For the pension investor, the great questions to be answered personally are: “Will there be another change of direction?” and “is putting good money away today worthwhile for a hopeful return in the future?” Little wonder that many who are able have chosen ISAs as their preferred choice. Others may have chosen the route of “buy to lets”. As with ISAs, they offer the ability to cash in at any time, as well as growing rental returns and a reasonable expectation of capital growth.”

At the same time, pensions are a ‘shrinking benefit’. News has come out that as part of a discussion paper on the future of Defined Benefit (DB) pensions, it said financially “stressed” companies might be allowed to water down previous promises. About 5% of businesses are in that category, according to the green paper. As many as eleven million people are members of private sector DB schemes, which link pensions to salaries. When we have an uncertain economic outlook, and when it’s difficult to make money from investing, there can be a real apathy.

Training is key 

Financial education and guidance delivered in the workplace is crucial to help employees set and achieve their financial goals, giving them more control over their finances, and ultimately their retirement plans in the future.

Then, once at-retirement, financial advice should be made available to employees to support better decision making and protect them from costly mistakes, such as paying unnecessary tax or being scammed.

Other goals could be to help employees to:

  • Become better financially organised and aware
  • Plan to fulfil their goals and aspirations outside of work
  • Minimise the tax they pay in future by making smart decisions now
  • Identify major potential savings in their financial affairs
  • Analyse and understand their corporate benefits package

Stewart Hastie adds in the CIPD “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.”

Your options

Whilst you can recommend financial options to a certain point, it makes good sense that as soon as an employee begins to ask for detailed pensions advice, for example, employers recommend that they seek it from a financial adviser.

According to pensions wise, it is key that you check your adviser is authorised by the FCA. Search the Money Advice Service’s retirement adviser directory to find an adviser.

Think about what advice you’re looking for; is it just advice on your retirement savings or do you want help with all of your financial planning?

Consider the level and experience that the adviser has, particularly in the areas where you think you need help. Look at the typical clients the adviser looks after in their business, do they have needs similar to your requirements? Think about whether you will be dealing with one adviser or different advisers, or, perhaps a team of people.

Look at the services they offer and think about how they will interact with you. Look at what products they recommend for you. Do they recommend products from the whole market, or are they products tied to one, or a small number of providers?

Understand what the adviser will charge for their services and that you can afford to pay these charges.

You should visit the FCA’s website, to get help in understanding what a financial adviser should do.

Don’t forget to always ask an adviser if they’re independent or restricted. Restricted advisers are limited to certain types of products (eg only annuities) or the providers they can choose from. Independent advisers cover the whole market.

After all, helping employees make the right choices in order to optimise their retirement income should be a priority!

Extra reading 

The Pensions advisory service has some great videos that could really help you out on some common questions. Take a look at these:

More Incentive and Motivation News:

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