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Jamie Lawrence

Wagestream

Insights Director

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Retirement courses – value for money or flirting with age discrimination?

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This article was written by Lee Coles, Head of Money After Work at Jelf Employment Benefits.

Funding spaces on courses for those approaching retirement can be a wise investment, but there are good, bad and ugly courses out there. I would like to state the financial case for the ‘good’ specimens of what is arguably an increasingly important form of workplace education.

The fact that it is now unlawful for an employer to set a default retirement age is common knowledge. You probably also know it’s unlawful to harass or victimise employees on the grounds of their age. A few “old timer” gags from a line manager along with an invitation to a retirement seminar and you could find yourself in an employment tribunal.

Needless to say, such regulation does make business and succession planning more difficult. You might never admit it, but the suggestion that some of your current employees will be working for you into their 70s may be a cause for concern. The reality is that a regular influx of new people is often vital in keeping a business moving forward.

Strictly speaking, the removal of the default retirement age doesn’t mean an employer can’t ever retire an employee. Forced retirement can be ‘objectively justified’ but passing this test may prove tricky. Case law has laid down some demanding criteria; for instance, any justification should be of a “public interest nature” and not specific to the particular needs of the employer enforcing the retirement. A secondary line of justification based on a forced retirement which protects the “dignity” of the retiree could also prove challenging to evidence.

It does appear, then, as though an employer’s hands are somewhat tied; clearly redundancy is only an option when a role is actually redundant; even a generous employer pension contribution doesn’t guarantee when an employee will actually take their benefits. It may be time to face the facts that employees now control the balance of power in determining when they will retire.

With that in mind, I see two best case scenarios for employers; 1) The productivity of an employee remains high so age becomes an irrelevance, and 2) It is the employee who starts the conversation as to how and when they can retire. Both outcomes can certainly be influenced by increased education.

Before I cover what I believe constitutes ‘good’ education in this context, there is an important question to answer as to whether employees will simply retire of their own accord. As George Foreman famously said “the question isn’t at what age I want to retire, it’s at what income.” The age at which individuals receive their state pension is on the rise, and one wonders if employees will make the right financial choices to be able to afford to stop working before this milestone. The government has got involved to increase the chances with auto enrolment but it will be a long time before this new legislation has a material impact on when an employee chooses to retire.

Inevitably some employees will prepare well for retirement and some won’t. Those who haven’t may previously have relied on getting advice to plan an employment exit strategy. There is, however, a new landscape for financial advice as a result of the FSA’s Retail Distribution Review (RDR). Financial advice has never been free and, in the past, it was not always clear how advisers were paid. Since 1st January 2013, instead of an adviser being paid commission, they now have to explain how much advice will cost and agree a set fee with each customer or charge an explicit percentage of any money invested.

In the long term, this has to be a good thing, but in the short term, there is plenty of commentary out there that members of the public will not be willing to pay professional service level fees for financial advice. Cue a groundswell supporting increased ‘DIY financial planning’, which may have some interesting consequences. That said, if more ‘DIY financial planning’ is the future and you as an employer can encourage and influence good financial choices by your workforce, you will increase the chances of their personal goals (one of which will be to retire at a reasonable age) being met.

So there is a line of argument for spending money on education for employees of all ages, but in my mind there are specific characteristics dictating what good looks like. Here is where the difference lies between whether we are looking at value from solely the traditional paternalistic perspective, or whether there is wider commercial value where the education of older employees meets the following criteria:

1) ‘Retirement’ is not the focus of the education.

The focus of any education activity should be on planning for the future, not the period after you have stopped working for this business. Retirement should not be presented as inevitable. By sourcing education which looks as much at continued employment as it does retirement, you are paying for positive evidence that you are embracing anti-age discrimination regulation.

2) The education should be holistic, covering both financial and well-being considerations.

Physical and mental well-being is obviously important as we get older and tend to creak more. You can imagine how positive messages about diet and exercise, for example, can have an almost immediate impact on productivity.

3) Any effort should focus on what employees want to achieve in the future.

Education is unlikely to work where the content is dry and fact-heavy. You’ll want employer benefits to be mentioned, but this should be a secondary message as a solution to an identified need. What does each employee want? When? Are they on track to meet their goals and if not, how are they going to close the gap? An employee with a purpose is arguably more productive that one who may have a tendency to drift.

4) The education should be on-going – a single event is unlikely to work.

Education doesn’t always lead to action, and it rarely does if there is not some form of follow-up or prompt. Think in terms of an on-going process if the messages are really going to sink in.

5) Always invite partners, wherever this is practically possible.

This point might seem less important, but don’t be fooled. It is not uncommon in any partnership for there to be a dominant force. I suggest you are much less likely to see significant changes or decisions made if the dominant force has not witnessed the education first hand.

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Jamie Lawrence

Insights Director

Read more from Jamie Lawrence
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