2009 will bring tools to enable staff to plan their future by managing perks in harmony, says Jamie Jenkins, head of employee wealth at Standard Life
There is something strangely appropriate about the animals celebrated in recent Chinese years. Looking at the performance of stock markets around the world, the relative highs experienced in 2007 may be associated with the Year of the Pig and the problems unearthed in 2008 with the Year of the Rat. Meanwhile, 2009 is the Year of the Ox or Bull – well, here’s hoping.
Given all the stock market turbulence and media coverage about the economic downturn it is hard for people not to be more engaged than ever with their finances. Whether they are worrying about keeping up their mortgage payments, wondering if their bank account is safe or simply watching the fall in the value of their pension, the downturn has focused the minds of many employees.
There is no doubt that the impact on peoples’ lives has been widespread. According to press reports, sales of home safes have increased, almost certainly because people are reverting to saving their money at home and in cash. There is some logic in this trend but it offers little protection against fire, theft or the real financial killer – inflation.
Buying a home safe is one solution but it will take people a long time to save up for their first home if they plan to pay for it in cash. And anyway, where would they keep their safe in the meantime?
The fact is that we all need solutions to the financial needs we have throughout our lives, and those needs are many and varied. From spending our earlier adult years in debt to accumulating wealth in our later life, we need a range of solutions to support and protect us along the way.
But in many cases, when people start work for the first time, their employer only offers a pension scheme. Of course, there is nothing wrong with a pension. In fact, long-term saving is a good idea but if a pension is an employee’s only option for saving it is not that helpful. Perhaps a more immediate need is for something more accessible, something people can draw on for the deposit on their house, to buy their first family car or to repay some of their credit card debt, for example.
Employers will increasingly look to provide employees with a wider range of savings options – perhaps a corporate individual savings account (Isa) for short-term saving, a group self-invested personal pension (Sipp) for those looking further ahead, and flexible benefits to support staff in their lifestyle choices along the way. Employees will also need education to help them make decisions and take a more holistic view of their financial affairs. Staff should engage with this, and value having more choice.
So I believe that 2009 will see the advent of employee wealth plans (EWPs) which will enable employees to prepare for their financial futures by managing certain complementary financial benefits alongside one another.
By the time personal accounts arrive in 2012, I think most forward-thinking employers will have EWPs in place for their staff, enabling them to get the best out of their total reward packages.
Oh, and 2012 will also be the Year of the Dragon. I have no idea what that means for stock markets but I do know it was not a bad Mickey Rourke film.
This article is brought to you by Standard Life
The views and opinions in this article are those of our sponsor Standard Life, and do not necessarily reflect those of www.employeebenefits.co.uk