If you read nothing else, read this…
• As many as nine out of 10 adults suffer stress over money matters, according to Axa research. Studies also show financial anxieties can affect performance at work.
• Financial education can help employees appreciate their, often costly, benefits packages. This, in turn, can boost staff morale, motivation and efficiency.
• The UK’s pension regime has become highly complex, and workers need help in planning contributions and managing investments.
• Employers should consult staff on how a financial education programme will work.
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Financial education pays off in a variety of ways for both employees and employers, says Jenny Keefe
Stress caused by money worries reaches across the generations – whether it is a junior worker fretting about their next rent payment or a senior executive scrimping to afford school fees and a four-bedroom house in London.
In July 2010, Axa’s Money sickness syndrome survey found that nine out of 10 adults are anxious because of poor financial understanding or control over their personal finances. The Institute for Employment Studies’ Financial wellbeing in the workplace report, published in March 2009, found that 10% of employees believe financial concerns negatively affect their performance at work.
Helen Duncan, head of employee education at Bluefin, says: “Workers should no longer consider personal finance to be ‘something I don’t get involved with’. There is an increasing need for people to understand and make decisions about their financial future. Homeowners do not need to be trained plumbers and carpenters, but they gradually learn basic DIY. Finance is the same, unless they are in the minority who can afford a financial adviser.”
What can employers gain?
But should employees boost their financial acumen in their own time or does an employer stand to gain by offering financial education? Duncan has no doubts about the benefits for employers. “The employees gain increased appreciation for the organisation’s benefits, which can come at a considerable business cost,” she says. “This, in turn, leads to increased motivation in the workplace and, ultimately, production.”
Meanwhile, workers who are desperately worried about debts become less productive. Duncan says: “Problem finances can be a considerable area of stress and anxiety, so addressing these issues should make for a more well-balanced, less-stressed workforce.”
James Biggs, corporate pensions specialist at Lorica, adds: “Proper planning gives an enormous sense of wellbeing. Questions such as ‘what if I die?’, ‘how will I retire comfortably?’ and ‘how do I save for my son’s university fees?’ bother employees if they remain unanswered. In reality, we as a nation are hopeless at fitting this into our own spare time. Lives are busy, work is hard and families can exhaust. Therefore, the best place to find the time to do this is the workplace.”
As regards pensions, the move away from defined benefit (DB) towards defined contribution (DC) schemes means staff need more guidance than ever. “Financial education will keep senior employees on the right track from a tax perspective and this was never more important than today with all the pension rule changes,” says Biggs.
Employees could take legal action
Despite this, just 30% of staff believe their employer is doing a good job in helping them plan for retirement, according to Mercer’s November 2010 survey Employee rewards, benefits and savings. In extreme cases, employees could turn to legal action to recover any losses. “Many employees do not pay in the right amount of personal contributions,” says Biggs. “But how many employers actually help them understand this and act on it? In fact, some employers prefer not to, for fear of being sued for giving advice that may turn out to be wrong. We warn that it is more likely that an employee would sue for not being educated.”
Finally, it is crucial for employers to seek workers’ views on the financial education provided. Sean McSweeney, principal corporate consultant at AWD Chase de Vere, says: “To ensure employers get maximum benefit for time and money spent, they should first understand their workforce’s needs. Financial education will provide positive results for employers only if the services offered are actually wanted and valued by employees.”
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