Last month’s budget saw the announcement of a number of measures that affect the UK’s savers and in particular, those who are saving toward retirement. These headline measures included the introduction of the new Lifetime ISA as well as changes to the government’s own financial education services – specifically, the Pensions Advisory Service and Pensions Wise will be replaced with one new guidance body for retirement funding.
However, being able to save for retirement simply isn’t always an option for an employee who is not in control of their finances, who is regularly in debt or who doesn’t have an eye on their monthly budget. That’s why I believe financial education for life should be made available via employers and in order to encourage them to offer this, greater tax incentives should be offered to organisations and businesses.
Undoubtedly, saving for retirement is an extremely important part of the bigger picture but unless an individual is shown how to budget, how to pay off student debts, how to buy a home, how to understand their tax position etc then the decision to save in a pension or similar savings vehicle could be postponed, potentially indefinitely. Employers are in an unrivalled position to be able to support their staff with these day-to-day issues which in the longer term could result in better awareness about the need to save for their life, post-work.
Financial education that goes beyond retirement planning is the key but smaller to medium sized businesses may well struggle to afford to deliver this as a service to their employees unless there is some incentive.
Offering incentives is not completely unchartered territory for the government: tax reliefs are already offered on employer-arranged pension advice up to a £150 limit per employee and I believe the potential increase to £500 (announced in the budget) is a step in the right direction but that further incentives are required to make financial education more mainstream.
Employers are becoming increasingly aware of the correlation between the monetary concerns of employees and a lack of productivity and engagement in the workplace, but it’s a very brave employee who admits to their employer or their colleagues that they have financial problems. We tend to think we probably know which types of employees need the most financial education too – those who are just starting out in their careers, those on lower salaries and those with student debts – but there are plenty of other groups too. Well paid managers might be struggling with a variety of financial commitments such as second homes, school fees and the expectations of family for other large purchases. Equally, new parents may have concerns about budgeting for their growing family at a point when one parent may have opted for part-time work.
Having false preconceptions about who needs financial support is often another barrier in employers offering help to their staff. In all these cases, if an employee doesn’t receive support, previously engaged employees can quickly become stressed and absence can creep in – from there it’s a long route to recovery.
Employers that offer financial education to staff, reduce the burden felt by some employees and can make a really positive difference to the day to day and therefore also, long-term finances and mental health of their staff.
Clearly, few employers will have any ability to offer financial education themselves, so it’s hugely important that incentives are offered which encourage the UK’s employers to seek third-party support in this area: employees should not be left making financial decisions based on a mate’s recommendation in the pub on a Friday night, or worse still, not making any financial decisions at all.
Understandably so, with numerous other pressures on employers, unless this is incentivised, it might be that only the very richest employers will be able to help their employees become better financially equipped for life.