This article is supplied by our channel sponsor Scottish Widows
The current economic outlook is a hot topic, ranging from the policies of the new coalition government to public sector debt and the shaky economic recovery. The one thing we can be sure of is that our short term economic future doesn’t look bright.
A Pension Policy Institute report recently suggested increasing the male pension age from 66 in 2016 would save the government £2bn a year and if the female state pension age was increased to 66 from 2020, the annual saving would be £3.5bn. Such changes may make the importance of retirement planning feel more relevant to both employers and employees.
These proposed changes may help to focus employee’s minds on what their future could look like and what savings they are relying on to provide the retirement they desire. Historically pensions and financial planning have been an area of confusion for employees, with many finding it hard to access the financial guidance they desire. Scottish Widows Workplace Research in 2008 showed that access to financial education, guidance and advice is an employee’s number one need.
We know these days many people struggle to trust financial services with the recession casting doubts over the security of savings. However, employers are still trusted by their workforce. The Scottish Widows UK Pensions Report 2009 showed workers do trust their employers and many enjoy access to employer-sponsored savings, seeing them as a major incentive to save.
Despite the lack of significant pay increases in recent years people do still want to save. The Scottish Widows UK Pensions Report 2009 shows a rise in the savings index to 54%, up 3% on 2008 and this is indicative of the trend of the past 3 years. Overall, workers are feeling worse off than they did five years ago and for some, saving for the short term has become the priority. However one-fifth of the population is not saving at all.
So with the increased awareness of retirement planning, created by a focus on the rise in the state pension age and employees’ desire to access financial education and guidance, we have an opportunity to increase engagement with workplace financial benefits.
A quality company pension scheme is a key factor for just under half of people moving jobs and 54% of staff say their workplace pensions scheme is an incentive to stay with their employer. So if workers are attracted by and value the provision of good pensions, why are employers still faced with a workforce that doesn’t fully use or value the benefits they are offered?
The answer to this may be to empower workers to take control of their own finances. By giving them access to the financial guidance, information and tools they need to make the right decisions about their long term financial management and doing it in a way that makes it convenient for them to access. For most (87%) online access is the preferred route, allowing them the flexibility to view their finances as and when they want to. Some employers we spoke to for the Scottish Widows Workplace Communication Research October 2009 have advocated allowing staff time at work to manage their finances.
The provision of needs-based information can make it easier for workers to identify how best to use the benefits available to them. Once a worker feels they are making better informed decisions about how to use their benefit package, the value of those benefits become more obvious.
And, in turn employers benefit because the value their workforce places on their reward package increases without the need for the employer to increase spend. Therefore, despite the challenges of the current economic climate there is definitely an opportunity to start to address the issues that the savings gap has created with effective and engaging communications on workplace savings.
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