Pension reforms and the potential increase in demand for workplace financial education
By Darren Laverty, Sales and Marketing Director at Foster Denovo
Since the pension changes came in to effect on the 6th April 2015, there has been much speculation of how much money consumers will be taking from their pension pots.
Whilst many will see access to their pension fund as a chance to spend, there is a serious side; how will it impact on their retirement plans over the longer term? Most people don’t have a financial adviser, or access to affordable advice, so how will those approaching retirement know what to choose?
The government has made a commitment to providing pension guidance, but delivering this will be a huge task. Of course, some information and guidance is better than no help but will it be enough? I firmly believe these new pension rules make it essential for people to understand the choices they have, and the implications of any actions they take.
Should employers get involved?
Now, more than ever before, access to workplace financial education is becoming increasingly significant. For those employers who currently don’t provide any help, the onus will gradually lie with them to support their staff through this transitional period.
Well over a year ago, we predicted a shift towards employers needing to provide financial education programmes in the workplace. Employers are increasingly seeing it as an engagement tool: according to independent research, 51% of those that offer financial education do so as they believe it increases staff engagement. Over the next few years, I believe we will see more employers providing financial education on all aspects of financial life, not just pensions, as an added benefit to staff.
If you do put a plan in place…
…a word of warning. Ensure you appoint people with a track record to manage financial education. Also, make sure that – as much as possible – communication with staff is on a face-to-face basis. There is nothing better than talking to people and conveying ideas and information in this format. Topics need to be relevant to your audience, and they need to be marketed professionally. There needs to be a process to make employees aware of what they need to learn.
At the end of the day, financial education is about changing people’s perspectives on their financial lives and helping to give so many of them the responsibility to manage their money. It has a key role to play.