Some employers are devising quirky schemes to help their employees save for a variety of purposes, including buying a property or a holiday.
If you read nothing else, read this…
- Employers are creating more innovative savings schemes for staff.
- Existing funds help employees to save for their first home, holidays and school fees.
- Successful take-up relies on a robust financial education programme.
Life has never been more challenging for Generation Y. UK unemployment may have fallen by 57,000 to 2.51 million in the three months to May, but long-term unemployment is up.
Add this to the fact that aspiring homeowners typically need at least a 20% deposit to buy their first home, the average price of which is now £162,621, according to the Land Registry, and Generation Y is facing a struggle to stay afloat.
So how can employers help, and why should they consider doing so?
A paternalistic desire to minimise the number of employees opting out of its pension scheme is one of the drivers behind Hymans Robertson’s workplace savings scheme.
The scheme, which won the organisation the accolade of ‘Best workplace savings benefits’ at the Employee Benefits Awards 2013, offers staff two options, which arose from a meeting of Hymans Robertson’s pensions and benefits committee, since renamed the DC [defined contribution] governance committee, two years ago.
The first mechanism enables staff to pay their pension contributions into a corporate individual savings account (Isa) while Hymans Robertson continues to pay its employer contributions into the pension scheme, a group personal pension (GPP) provided by Standard Life. This helps employees to generate short-term savings.
The second option enables employees to take a pensions holiday, as long as they have been a member of the GPP for at least two years.
The scheme, which aims to encourage pension scheme membership, has resulted in scheme take-up rates exceeding 90% since the organisation auto-enrolled its workforce on 1 June 2013, and its opt-out rate remains relatively low at about 10%.
Steve Moore, HR manager at Hymans Robertson, says: “We wanted to give as much [savings] flexibility as possible for employees at various stages of their lives, whether it’s buying a house or needing to pay school fees or getting married.
“It was really thinking about, for staff who weren’t engaged in the pension, why was that the case, and what could we do to offer a bit more diversification that would encourage them to save in different ways?”
Recruitment business Goodman Masson is also supporting its employees with life events, such as buying a property, improving their current home or taking a holiday, with the objective of increasing staff retention.
Chief executive Guy Hayward describes the workforce as largely aged between 25 and 29, unmarried and earning between £50,000 and £60,000 a year, but struggling to join the property ladder, which is why it created a mortgage scheme a year ago.
“The challenge was: our people cannot buy a house, so let’s help them buy a house so they can stay with us for longer,” says Hayward. “In our industry, the moment we can create longevity or retention, then our productivity and profitability goes up. There’s a direct correlation.”
Under the terms of the three-year scheme, Goodman Masson will add either 33% or 50% of the contributions that employees pay in, which can be a combination of payments from their basic salary and bonuses, to their total amount of savings.
There are currently 27 aspiring homeowners investing in the fund, which is a standalone bank account managed by Goodman Masson’s corporate bank, NatWest.
The schemes are part of the organisation’s Benefits Boutique, which won it ‘Best reward strategy aligned to business strategy’ at the Employee Benefits Awards 2013.
Of course, there are more traditional savings vehicles that employers can use to help employees to save, such as share schemes.
But whatever the scheme, employers’ objectives must be clear and their communication strategies robust enough to persuade staff to use it.
Jonathan Watts-Lay, a director at financial education provider Wealth at Work, says: “We often find that, particularly with workplace Isas, they are set up [by employers], but there is very poor take-up because people don’t really understand why they would use one in the workplace, which is why education is important.”
Steve Moore, HR manager at Hymans Robertson, will speak about the role of benefits in HR strategy at Employee Benefits Live on Thursday 26 September 2013