Financial Education: Economical ways to increase employee awareness

If you read nothing else, read this…

  • There are a number of ways in which employers can provide financial education
    for their employees cost-efficiently, such as online programmes.
  • Some services, such as those provided by the Money Advice Service, are available at no cost to an organisation.
  • The cost of providing financial education will often depend on what an employer is trying to achieve by offering it.
  • Tying financial education into a particular employee event, such as retirement or redundancy, can be a particularly effective way to deliver it.

Case study: Financial education workshops pay off for BGL Group staff

Insurance broker the BGL Group has added a financial education programme to the range of benefits it offers its 2,100 employees.

Lucy Painter, associate director for shared services group HR at the company, says: “We already run pension seminars and one-to-one sessions with our pensions consultant, AWD Chase de Vere, as well as giving employees access to financial help on our employee assistance programme (EAP).

“These are very well received and we get lots of requests for more financial education, so we decided to broaden out the programme.”

After researching the market, Painter decided to use the Money Advice Service to provide a financial education programme.

“We really like the material,” says Painter. “It covers a broad range of topics and it makes finance fun and simple, which aligns well with our culture.”

A series of Money Matters workshops, which include budgeting, borrowing, insurance and savings and investment, were launched in March, with staff given time off work to attend.

“We are monitoring feedback from the workshops to help us decide what to offer next,” says Painter. “We want our employees to benefit from the information they receive, using tips from the workshops to help them make the most of their money.”

The benefits of financial education are clear and the variety of delivery methods available to employers means it can be a low-cost exercise, says Sam Barrett

Offering employees financial education can deliver a number of benefits for employers, ranging from improved engagement to reduced sickness absence. And for employers that are keen to practise what they preach, it is also possible to provide education cost-efficiently.

Stuart Bailey, head of national partnerships at the Money Advice Service (previously the Consumer Financial Education Board), says: “Financial education can make a significant difference to employees. It is not just about helping people with problems, it is about giving them the information they need to make the most of their money.”

A number of drivers are prompting employers to consider financial education in the workplace. The state of the economy is playing a part, with organisations recognising that staff appreciate help in making their money go further in tough times.

But whether the economy is in boom or bust, there are various motivations for offering financial education, says Jeanette Makings, director, financial education services at Close Asset Management. “Some employers feel it is their duty of care, others want to empower their employees, and some do it to improve take-up and engagement with the benefits package,” she says.

Money sickness syndrome

It is also good for business. According to research conducted by Onepoll for Axa in June 2010, poor understanding and control of personal finances by employees can cause something known as money sickness syndrome. Symptoms including anxiety, depression, sleeplessness and even a decline in sex drive. These can all affect an employee’s productivity, possibly leading to higher levels of sickness absence.

To avoid such problems, various forms of financial education are available. Roger Breeden, principal at Mercer, says: “There are plenty of ways to deliver financial education, including online programmes, written material, presentations, seminars and one-to-one sessions. What is right will depend on the type of education [employers] want to deliver, with the cost generally increasing as they include more face-to-face sessions.”

Some financial education can be provided at no cost. The Money Advice Service was set up by the Financial Services Authority (FSA) to help people manage their finances better. As well as providing information to individuals, it also runs a financial education programme for employers. In the four years it has been running, the service has worked with more than 180,000 employees.

Bailey explains: “Initially, we work with the employer to understand the workforce and put together a programme that suits its needs. We will look at how it normally communicates with employees and what areas of financial education are relevant. We do not charge the employer, although it will have to be prepared to allow employees to take some time out to attend a seminar.”

Employers can also tap into the resources of Life Academy, a charity designed to help people prepare for life changes such as retirement and redundancy. This organisation also provides a financial education programme, Learn About Money. Stuart Royston, chief executive of Life Academy, says: “We can provide an online programme and written resources as well as face-to-face education. We do charge, but this will be dependent on the employer’s ability to pay.”

Web-based programmes

The internet has also helped to make financial education accessible and there are plenty of web-based programmes available. These vary in price depending on the provider, the number of employees covered and whether additional services are purchased. For example, Killik Employee Services’ online programme Money in Mind costs an average of £15 a year per employee.

Lauren Peters, head of financial education for Money in Mind at Killik, says the online environment is great for financial education. “Employees can access it wherever they want, at home or at work, and it is really interactive with plenty of tools and calculators,” she explains. “Additionally, employees can use the live chat facility to ask questions they might not have felt able to ask in a seminar.”

Broader and more bespoke services are also available, without necessarily increasing the cost. These can include seminars and presentations, as well as online learning. For instance, Close Asset Management works with one employer with 5,000 employees to put together a programme of 40 events a year at a cost of about £3 per employee.

Often, it will come down to what the employer is trying to achieve, says Mick Calvert, head of financial planning at Towers Watson. “If an employer wants to deliver financial education to its employees on a cost-effective basis, we recommend starting with broad sessions and then filtering down to one-to-one sessions for those that need them,” he says. “A lot of employees will find their questions are answered without the need for one-to-one advice.”

Tying financial education into a particular event can also be successful. Possible triggers could be retirement, redundancy, flexible benefits enrolment and share plan maturation. Mercer’s Breeden says: “This can be very beneficial as employees are able to go away and use the information. But if [employers] wanted to do something more general, such as raise awareness of the need to save, they might want to do something on a more regular basis.”

It is also important to consider the type of financial education employers want to deliver. For example, few employers will attract many staff to a seminar on debt management, but this subject could be tackled online or by directing employees to debt advice through an employee assistance programme.

Given the breadth of financial education available, the most effective approach is likely to be a combination of services. For instance, Breeden explains the employers he works with often offer their staff programmes from the Money Advice Service.

“Employees will have varying needs when it comes to financial education,” he adds. “Whether they need information about the basics or more personalised help with their pension planning, offering a broad spread of options will help them all benefit from financial education.”

Tax breaks on financial advice

• Employers can take advantage of a tax break on pensions advice to make the delivery of financial education even more cost-efficient.

• Under HM Revenue and Customs rules, statutory instrument 2004/3087 exempts the cost of pensions advice and information from a benefits charge as long as: similar advice is offered to all employees; advice does not extend
beyond pensions into general financial, particularly tax, advice; and the cost is no more than £150 per employee a year.

• Although this arrangement offers both employers and employees a tax break, few employers use it.

• The problem is, you do not get much pensions advice for £150. For example, to carry out a full pensions review, you need about seven or eight hours of advice, but £150 would pay for less than an hour’s face-to-face advice.

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• The tax break applies only when the cost of pensions advice is £150 or less. Provide more costly advice and the whole amount is taxable, not just the excess over £150.

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