Ways to support employees with short-term and long-term savings throughout their career

Apart from complexity and jargon, one of the biggest issues with getting people engaged with saving, is what I would call “product isolation”. In general the financial services industry is too siloed in the way it positions and talks about products. There’s absolutely no wider context given – which in my opinion is a critical failure point.

For example, when it comes to pensions, they are too often spoken about in isolation as if retirement was the only financial need that an employee might have. Regardless of how old an employee is, standard communications are geared towards retirement even if that might be 40 years away. Retirement might be the end game, but it’s not going to get a 25-year-old excited about saving today!

A joined-up savings approach

If we are to support employees with saving, we need to support them with all of their savings needs – short and long-term. We shouldn’t be focused on specific events without putting them into the context of an employee’s entire financial life journey and helping them along the way.

Getting back to the 25-year-old, she might be starting to panic about not having enough in savings, managing credit card debt or trying to get on the housing ladder. And then along comes a piece of communication telling her that unless she starts saving more into her pension, she can look forward to a less than desirable retirement. I should imagine that she wouldn’t find this particularly helpful!

But how about a different approach, one that puts her more in control over deciding what is important to her? As her employer, you give her the choice of how much you both pay into her pension (so long as it meets the auto enrolment minimums) and any balance gets paid into an ISA to help her with her other financial needs. Now given where she’s at, this is more likely to elicit a response and engage her. It’s no longer just about retirement, she’s been given an option that could help her get on the housing ladder, as well as save for the longer term.

Now that’s what you call a joined-up approach. As an employer, isn’t the focus about getting employees saving rather than saving for a single specific event and into a single specific product? Once the employee in question is engaged with savings, not just saving – and there is a marked difference – she’s in control, and with the right communications and education, is likely to make more informed decisions.

A more personal perspective

I would argue that supporting employees isn’t about taking a paternalistic approach and deciding what’s good for them, it’s about taking a more personalised approach where employees can decide what’s best for them at any given time – clearly within the regulatory framework. It’s about giving them access to products (rather a single product), education and ultimately choice.

This approach is really gaining traction and it’s called pension redirect. We run it for a number of clients and it’s definitely more engaging. It in no way detracts from the importance of pensions, in fact, I would say it improves engagement with pensions especially among younger employees – they have to make a choice, and that in itself is engaging.

The bottom line is, we need to get employees engaged with saving not just putting them into savings. That’s how we support them with short term and long term needs – giving them choice!

The author is Steve Watson, head of proposition at Cushon.

This article is provided by Cushon.

REBA’s Maggie Williams will be in conversation with Baroness Ros Altmann CBE at REBA’s live and in-person Employee Wellbeing Congress on 30 September. Find out more and register to attend.