What is financial education?
Financial education helps to equip people with the knowledge and skills to manage money effectively at every stage of life. It has become an increasingly important part of the employee benefits package, covering a range of money matters, from managing a budget and managing debt to saving money and preparing for retirement.
There are three elements to this: education, guidance, and advice. The first provides generalised information designed to educate staff on issues like savings schemes, budgeting advice, and retirement. Guidance tends to be more individualised, where employees have access to one-on-one consultations with an expert who can help them understand the particulars affecting their own situation, without steering the person towards a specific solution. Financial advice is regulated and involves an accredited expert actively advising someone on the management of their finances.
Demand for provision has grown in recent years, particularly in the current economic climate. PWC’s Employee financial wellness survey, conducted in January 2023, found that 74% of employees said they would like some help with their finances. The report also revealed growth in the use of financial wellbeing benefits such as coaching, workshops or webinars and online tools, with 68% of those whose employer offered financial wellness services using these, compared with 51% in 2012.
Financial literacy and stress are also major concerns for employers. Following the latest Autumn Statement, financial education provider Bippit reported a rise in the number of organisations looking to understand how financial coaching can give employees the confidence and knowledge to increase their pension contributions. If employers operate salary sacrifice arrangements or are willing to switch, these increased pension contributions could reduce the impact of the Chancellor’s national insurance hike, which can cost employers millions more every year, depending on an organisation’s size.
What are the cost implications?
The cost of provision varies with the type of programme being offered, with the most elaborate and bespoke branded packages running into several thousand pounds. However, some financial education for staff is available at no extra cost. For example, most pension providers are happy to provide information or organise workshops to help employees understand their retirement savings and the products on offer to them, via their employer.
Online courses and digital resources are generally more cost-effective than in-person workshops or one-on-one coaching. Some large organisations have developed their own in-house programmes, however, many work with external providers, which can add to the cost. The provision of financial education as a benefit can offer long-term cost savings for employers by reducing financial stress among employees, leading to fewer distractions, lower turnover, and a boost to employee engagement.
Are there any tax or legal issues?
Financial education and guidance are not regulated services, so the legal issues that apply to financial advice do not apply. However, employers need to recognise the legal boundary between regulated advice and unregulated guidance, and work with providers that are clear about the difference between the two.
Offering employees access to financial education can be a valuable and tax-efficient benefit, depending on the nature of the services being provided. Where group support is offered, for example via an online portal or in-house seminar, the cost will typically be paid by the employer, and it is unlikely to be treated as a taxable benefit. However, a service offered on an individual basis can be treated as a benefit in kind. Under current UK tax rules, employers can provide up to £500 worth of pensions advice to their employees each tax year without incurring any tax or national insurance liabilities.
What are the current market trends or developments?
Employers today are much better informed about the factors that support financial wellbeing, resulting in a growing trend of integrating financial education with broader wellbeing initiatives, such as debt management services and retirement planning.
The industry is also responding to organisational concerns about inappropriate guidance, for example, employees accessing poor information from non-reputable sources, by enforcing service guardrails to reassure employers that their employees are being provided with proven and evidence-based guidance.
In terms of delivery trends, digital platforms are a popular option, with a focus on flexible online learning tools that employees can access at any time. There has also been a move toward more personalised content, offering guidance tailored to specific age groups, income levels, or life stages.
Who are the main providers and what types of schemes do they offer?
Some of the leading providers of financial education and information include Aon Employee Benefits, Bippit, Chase de Vere, Fidelity, Nudge Global, Octopus Money and Wealth at Work. Programmes are delivered in variety of formats, from interactive online programmes and webinars to traditional seminars and workshops, catering for a range of learning preferences and enabling employers to match financial education services to the specific needs of their staff.
