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Over a third of employees would like flexible savings options
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Most employees (74%) do not expect their employers to take on a paternalistic role
Employees want more flexibility around their savings and pensions options but employers are not catering for their needs, according to data from Mercer. The firm’s surveys of employers and employees* show that although, on average, employees still rank pensions as the long-term savings vehicle they most value (58%), 21% would like to have the option of saving into cash accounts and 9% into corporate cash ISAs. The survey showed that very few employers offered alternative savings vehicles with only 2% offering cash savings plans and 2% corporate cash ISAs.
Mercer’s data also showed employees’ savings preferences to vary considerably with age. The cash savings option was more popular amongst the younger staff (32% of 16-24 year olds favour it, and 28% of 25-34 year olds), whereas pensions was the savings vehicle of choice for those closer to retirement (65% of 45-54 year olds, 69% of 55-64 year olds).
“Our surveys show a clear gap between what employees want and what employers are currently providing,” said Gail Philippart, a Principal and DC expert in Mercer Retirement business. “Employees’ needs are evolving and will change as they progress through their working life. To become the employer of choice companies need to listen to what their staff need and meet those needs with benefits that are appropriate and will be valued by staff.
“Many employees in the generation now entering the work force are steeped in student debt, with little chance of getting on the housing ladder anytime soon. Offering them the choice of paying down student debt or saving for a deposit on a house through a savings option is an effective staff retention tool, and a great way of helping staff deal with their individual financial priorities.”
Ms Philippart added: “Pensions should still be the key savings tool for retirement, and the fact that such a large proportion of employees highly value their schemes is encouraging to see. However employees also want something that will help them with their short and medium term savings needs and feel there would be advantage in this being available through the workplace.”
Nearly half of the companies surveyed take a paternalistic approach to benefits provision, i.e. helping their employees make the right benefit choices and setting the appropriate levels of contribution. Mercer’s data showed that, contrary to what employers might think, most employees (74%) do not expect this of them. Instead of being directed, the majority of employees (47%) would like their employer to take a ‘facilitative’ approach, in other words, give them the choice and flexibility to select their own benefits. Only 26% expect their employers to take on a paternalistic role and 27% expect their employers to provide the bare essentials, through a ‘compliant approach’.
Ms Philippart said: “The nature of trust-based pension schemes means the approach is more paternalistic. However, there are now more ways to construct the financial elements of reward packages to ensure the needs of employees are met.”
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