The Treasury and FCA’s Financial Advice Marketing Review, was set up to understand how access to financial advice and guidance could be improved. In March this year it made 26 recommendations, 3 of which will be followed up by its financial advice working group, made up of 16 consumer and industry experts. One of the recommendations was a guide to the top ten ways for employers to support employees’ financial health to be published in early 2017.
The Treasury and FCA will be responsible for the remaining 23 recommendations, with the working group supporting the progress of the Financial Advice Market Review over the 12 months following the March 2016 report.
Kate Smith, head of pensions at Aegon said: “As a ‘trusted source’ employers are ideally placed to improve their employees’ financial health through education and guidance. Employers already provide their staff pension, and in many cases some life cover, so they are closely linked to the process of preparing for retirement and also covering costs should the worst happen. For these reasons it makes a lot of sense for employers to play a role in guiding their staff on money matters but without overstepping into financial advice. But before we put the pressure on employers to take on this responsibility, we need to reassure them that they won’t be alone. They have the support of corporate advisers and guidance bodies as well as pension providers.”
Aegon’s top ten ways to support employees’ financial health:
1. Pension saving – Encourage employees not to opt-out of the workplace pension scheme by highlighting their entitlement to the employer’s pension contribution. Remind them that it’s part of their salary package.
2. Matching contributions – Employers should highlight if they match staff pension contributions that employees need to pay enough to benefit fully from these or they will be missing out on part of their salary package.
3. Reviewing and updating their investment options – Employers can encourage ensure staff know their pension scheme investment options. They could encourage them to take an online risk test so they are better informed to make active investment decisions.
4. Get them online – Encourage employees to view their pension online if this option is available. This can make monitoring and managing simple.
5. Set up a ‘save more tomorrow’ facility – Let employees know if the company offer this facility. It allows them to sign up today to increase their pension contributions at their next pay rise or promotion automatically.
6. Start thinking about retirement income early – As employees reach age 50, encourage them to start thinking about their retirement income options. Encourage them to talk to an adviser at this stage about how and when they will take their retirement income and if they need to adjust their investments.
7. Save for a rainy day – Remind employees that it’s a good idea to keep around two months’ worth of salary in cash in a bank account or in an accessible cash ISA for emergencies.
8. Plan for the worst – While some life cover might be provided in the workplace, encourage employees to think about taking out extra life cover and possibly critical illness and/or income protection, to protect their loved ones in the event of a serious illness or death. During their time in your employment their circumstances will change, so their protection needs will change too. Let your employees know what they are and aren’t covered for on a regular basis prompting them to review their situation.
9. Guidance – Direct employees to publicly available guidance such as Pensions Wise and Citizens Advice.
10. Advice – Remind employees of your workplace advice facility, if you offer this and how they can access it. Otherwise encourage employees to get their own professional adviser
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