Helping your employees with their financial future
For employer use only
As an employer, you’ve put your trust in your employees to carry out their roles to the very best of their abilities. On the flip side, your employees put a great deal of trust in you, not just to pay them, but critically, as a trusted source for information.
We know that you, as employers and trustees, are well-placed to help influence employees saving behaviour, but you may (understandably) have some concern about promoting your scheme and pension savings in the fear that you might cross the regulated advice boundary and be exposed to regulatory sanction or liability.
The Financial Conduct Authority’s (FCA) Financial Advice Market Review (FAMR) was launched in August 2015 as a result of concern that the market for financial advice was not working well for consumers. The Review aimed to explore ways in which the government, industry, employers and regulators could take collective steps and make changes to deliver affordable and accessible financial advice and guidance to everyone.
FAMR has now published a draft employer and trustee factsheet which sets out what employers and trustees can provide on financial matters such as pensions to support decision-making.
The FCA’s position hasn’t changed and the regulator has confirmed that employers should only provide factual information to their employees, and must avoid promoting a scheme as it could constitute a financial promotion. However, we are all too aware that this provides you with little reassurance. Meanwhile, the Financial Advice Working Group has proposed a web portal and employer guide which could once fully developed, go a long way to addressing this by helping employees to manage their financial well-being via the workplace.
The workplace is at the heart of pension saving, but we know that more needs to be done to empower employers to talk more positively about their own scheme, supported by financial advice from the experts. Improving financial well-being can have a positive impact on employees’ work performance which in turn can be beneficial for employers.
While the web portal and guide are being developed, we have put together our own tips for you to support employees’ financial health.
Our 10 top tips for helping your employees secure their financial future:
While this list is not exhaustive, it provides a solid base upon which to build up your employee support.
1. Pension saving
Encourage your employees not to opt-out of the workplace pension scheme by highlighting their entitlement to the employer’s pension contribution. Remind them that it’s part of their salary package. (Link to employee engagement)
2. Matching contributions
Employers should highlight if they match staff pension contributions that employees need to pay enough to benefit fully from these or they will be missing out on part of their salary package.
3. Reviewing and updating their investment options
Employers can encourage and ensure staff know their pension scheme investment options. They could encourage them to take an online risk test so they are better informed to make active investment decisions.
4. Get employees online
Encourage your employees to view their pension online if this option is available. This can make monitoring and managing simple.
5. Set up a ‘save more tomorrow’ facility
Let your employees know if the company offer this facility. It allows them to sign up today to increase their pension contributions at their next pay rise or promotion automatically.
6. Start thinking about retirement income early
As your employees reach age 50, encourage them to start thinking about their retirement income options. Encourage them to talk to an adviser at this stage about how and when they will take their retirement income and if they need to adjust their investments.
7. Save for a rainy day
Remind your employees that it’s a good idea to keep around two months’ worth of salary in cash in a bank account or in an accessible cash ISA for emergencies.
8. Plan for the worst
While some life cover might be provided in the workplace, encourage your employees to think about taking out extra life cover and possibly critical illness and/or income protection, to protect their loved ones in the event of a serious illness or death. During their time in your employment, their circumstances will change, so their protection needs will change too. Let your employees know what they are and aren’t covered for on a regular basis, prompting them to review their situation.
Remind your employees of your workplace advice facility, if you offer this and how they can access it. Otherwise, encourage employees to get their own professional adviser.
While you are well placed to provide your employees with some of the information they require, the pressure is not, and should not, be all on you. It is crucial that both you and your employees have the support of corporate advisers and guidance bodies, as well as ourselves as pension providers.
For more ways to help your employees and to read the full FCA report, click here.