Three ways to ensure workplace savings for all employees of all ages
The introduction of auto enrolment, which has seen an additional 10 million employees joining a company pension scheme over the past seven years, simply cemented this singular focus ie pensions are the priority.
So why the need for financial wellbeing in the workplace?
Employees have financial worries and these concerns are creating stress, which in turn has a negative impact on productivity. And for most employees, their financial worries have nothing to do with retirement, so pensions (that can’t be accessed until age 55) don’t help.
According to our realigning the workplace savings offering to meet the needs of millennials (2019) research, nearly 92% of employees have financial concerns but only 23.5% are concerned about saving for retirement. As you would expect, retirement is less concerning for younger employees (only 14% of under 45s) but it becomes more of an issue as employees age (nearly 38% of over 45s).
In a nutshell, research shows that there’s a definite gap between the financial needs of employees and the support given by employers. Most employees are in a pension scheme and receiving employer contributions, but most employees aren’t concerned about retirement.
So, what does a good workplace savings scheme look like?
Not surprisingly, the things that worry employees are very much based on where they are in life and of course their age.
Our research shows that for 25% of under 35s, their biggest concern is how to afford their first home. This isn’t to say that saving into a pension isn’t important, but buying a home is the priority. Compare this to 40% of over 55s who are concerned about retirement; they have other concerns, but impending retirement is the priority.
A good workplace savings scheme will have a Lifetime ISA (LISA) for the under 35s to save for their first home (LISA benefits include a 25% government bonus up to £1,000 a year) and a pension scheme that provides flexibility for the over 55s concerned about funding their retirement.
There are of course other ISAs such as standard cash and investment ISAs and junior ISAs, which should form part of the product offering.
Don’t just contribute to the pension scheme
Auto enrolment specifies minimum contribution levels and these must be complied with. However, if the employer and employee contributions exceed this amount, consider splitting contributions between the pension scheme and a LISA.
For instance, if you currently contribute 6% to the pension scheme and this is matched by the employee, you should consider reducing the 6% to 4% and contributing the balance to a LISA or another type of ISA. You’re then more aligned with the needs of the under 35s. Older employees can elect to keep pension contribution levels unchanged to match their needs.
Nearly 30% of under 35s confirmed they would consider this type of arrangement.
Support and educate
A big part of financial wellbeing in the workplace is support and education. Nearly 66% of employees surveyed by Smarterly confirmed they would feel more comfortable about making financial decisions if they received support from the employer. This increased to more than 76% for under 35s.
This article is provided by Smarterly.
In partnership with Cushon
Cushon is an online savings&investments platform provider, offering holistic workplace savings.