What is the current thinking on benefits?
Chase de Vere has undertaken extensive research with senior HR decision makers to capture their attitudes on employee benefits and related services. Some of the more interesting results were in relation to the provision of financial education services for their employees. Article from Sean McSweeny, Chase de Vere.
The research, which we conducted in conjunction with Lightbulb, an independent research company, consisted of making 10,000 phone calls to employers, which are representative of the UK company population, and then holding in-depth interviews with senior HR decision makers in 300 randomly selected businesses. This took place from the end of 2016 until mid March 2017 and follows similar research we conducted last year.
We asked, “Who has the main responsibility to provide financial education for your employees?” The difference in responses from when we asked this question last year was startling and enlightening. In 2016, 65 percent of respondents said that the Government had the main responsibility for providing financial education for their employees, with 14 percent saying the employer has and only 4 percent answering that the individual employees themselves should be responsible for their own financial education. The other responses were 14 percent who said pension providers and 3 percent who said financial advisers. This gives the perception that HR decision makers didn’t give a high priority to financial education, to the extent that it should largely be provided to their employees by the Government.
However, in our 2017 research, the number of HR professionals who said the Government should be responsible has been slashed from 65 percent to just 35 percent. Equally startling is that 29 percent of employers now say that the individual employees should take responsibility. This is a huge and significant increase in numbers. This change in stance is reflective of the market place as a whole in that more people are recognising that they have to take personal responsibility for their own financial wellbeing. Interestingly there was a sizeable increase from 14 percent to 20 percent in the number of HR decision makers who thought that employers should take responsibility for the financial education of their employees. This very much reflects my own perceptions when working with employers, in that still a minority but definitely a growing number are looking to add or expand financial education services.
We then asked, “Is financial advice something you feel your employees would value and benefit from?” An overwhelming majority of the HR decision makers we asked, at 85 percent, said that their employees would. This is very encouraging and I would agree with this view. We provide financial education and advice services to employees, which can range from fully comprehensive financial planning to focusing just on the employee benefits provided by the employers and predominantly the workplace pension scheme. Even with just the latter scenario, the introduction of pension freedoms in April 2015 has given employees far more choice about what they can do with their pension schemes and how they take benefits. However, it has also given them far more complexity and increased the likelihood that they will make the wrong decisions which could, in the worst scenarios, have a detrimental effect on their standard of living in retirement.
We then asked, “Do you plan to do more to help your employees make more informed choices regarding their retirement?” Following on from the question above where the majority of employers recognise that financial advice is something their employees would benefit from, we found that 58 percent of employers plan to help their employees make more informed decisions about their retirement choices. This is still a very positive figure, especially when you consider that many employees will need help as they won’t be in a position where they are able to access independent financial advice on their own.
However, we then asked, “Would your company have the appetite to pay for financial advice for your employees?” We found that 42 percent of employers said their company would. This does of course mean that the majority of companies still don’t have an appetite to pay for financial advice for their employees. Finally we asked, “Do you anticipate including a cost for financial advice for your employees in your 2017/18 budgets?” In response, 36 percent of HR decision makers said yes. As we might expect, we have seen a continual reduction in numbers, from 85 percent of employers who understand that their employees would value and benefit from financial advice, to 58 percent who plan to do more to help their employees make more informed choices about their retirement, to 42 percent who would have an appetite to pay for financial advice for their employees and finally to 36 percent who are actually expecting to pay towards this in the coming year.
However, it is still very encouraging that over one-third of employers are expecting to spend money on financial education and advice services. In my experience, it is clear that the trend is upwards and I would expect the number that would be willing to pay to be even higher when we ask the question again next year. Employers are ideally placed to help their employees plan for their own financial futures and there may be a further vested interest in them doing so. Some of those who don’t could be faced with an ageing workforce which hasn’t planned ahead and cannot afford to retire. This could have a knock-on effect in terms of the business suffering from lower productivity, succession planning issues and losing younger talent to competitors that provide more opportunity for advancement.