Segmenting the workforce to suit every stage of employee’ lives is one way of targeting financial education effectively, says Tom Washington
In reality, providing completely bespoke, personalised financial education for each employee is impossible, as their needs will be so varied. Offering one-to-one meetings with an independent financial adviser is the only way of ensuring each individual’s requirements are met, but this can be expensive for employers to provide.
One way of ensuring employees receive relevant information is to segment the workforce into groups according to their personal circumstances. By tailoring financial education employers can target different groups with information on employee benefits or personal finance issues that will be of interest to them. Such groups can be selected by age, life stage and degree of affluence, for example.
Much like a marketing campaign, a financial education programme should be designed to appeal to its target audience, be this graduates fresh out of university or long-serving workers closing in on retirement.
Gareth Ashley-Jones, head of flexible benefits at Aon Consulting, says communicating certain perks to the wrong group of employees can mean much information falls on deaf ears.
“We find that peoples’ needs change a lot as they age,” Ashley-Jones explains. “Most young people tend not to think about death-in-service [perks] or long-term sickness pay but as they get older they accrue more commitments such as family and mortgages, so that kind of financial protection becomes more important to them.”
However, it does not mean that financial education around such benefits should be avoided due to a perceived lack of employee interest. For example, Ashley-Jones believes education around pensions can be tailored to encourage less financially-aware employees to save. “Many young new joiners at companies do not bother to join defined contribution (DC) pension schemes on the basis that they will only be there a year or two so they don’t think it is worthwhile,” he says. “Then, down the line, they regret not joining earlier.”
David Whitely, a spokesperson for the Financial Services Authority’s financial capability division, adds: “The important thing when [employers] are doing financial education in the workplace is to ensure what they are delivering is relevant to the people they are trying to reach. There is no point giving everyone a boring, general lecture [on finance].”
Employers can also use segmentation to identify which staff are most in need of financial education. Damian Stancombe, head of corporate defined contribution at Punter Southall, says: “[Employers] can exclude 20% or 30% of staff [from financial education] by working out who they need to give education to.”
Dividing a workforce according to personal circumstances can be achieved in several ways. The most obvious method is to do it by age. If the aim of a particular strand of a financial education programme is to discuss debt management, the needs of younger employees are likely to differ hugely from those of older workers.
“If an employer is looking at [offering financial education to] a graduate crippled by student debt, [it is clear] their aspirations [will be] completely different from those of a mid-life employee who is half way towards paying off their mortgage,” says Stancombe.
Younger groups of employees may want to know more about corporate individual savings accounts (Isas) that can be used to help them save for a house deposit or to pay off a student loan rather than a pension or a death-in-service benefit. Jonathan Watts-Lay, director at JP Morgan Invest, explains: “If you take an average 50-year-old who has got an eye on retirement, they will be quite conscious of saving whereas a 20-year-old will think: ‘I have got more important things to worry about than my pension’.”
Younger employees may also benefit from receiving information on mortgages and the best savings vehicles to use when looking to put together a deposit on a house.
At the other end of the spectrum, pre-retirement education can be used to target workers approaching the end of their careers, to offer them information on how to maximise their pensions and ensure they are financially prepared for life after work. “Retirement is now the biggest financial decision people make in their lives,” says Watts-Lay. “The Pensions Regulator is saying that [employers] must ensure employees understand they have options [at retirement], and [that they] have to start educating them about annuities and so on.”
Although age can be used to help identify the needs of the young and old, life stage may be a more appropriate indicator. For example, employees who become parents for the first time may be in their teens or in their 40s. Either way, they may need educating on what perks are relevant to them. It might also be helpful if employers flag up which state benefits they are entitled to.
Another key life stage that should be taken into account is divorce, when an employee’s income and assets may end up being split between two households. Staff may need guidance on the impact of their new personal circumstances on their benefits.
Employers should also bear in mind some employees may subsequently remarry and raise second families, which will bring another set of financial challenges.
Employee affluence is also a factor to be taken into account when segmenting a workforce. Using payroll data or assumptions made from employees’ postcodes, employers can come up with possible priorities, which range from managing debt to guidance on types of investments.
With like-minded people in a room, it is much easier to deliver a coherent message. Charles Cotton, reward adviser at the Chartered Institute of Personnel and Development, says: “People who are well paid may be looking to increase their wealth, while [lower-paid] staff may be looking to stretch the value of their pound or reduce their debt.”
Once employers have segmented their workforce, the delivery as well as the content of a financial education programme should be adapted accordingly. “A mistake companies have made in the past, even with something like pension benefits, is that they produce the same brochure, worded in exactly the same way, [and present it] to their entire workforce,” says Watts-Lay. “If you talk to marketing people they will [always] say you have to segment your market.”
Older workers are somewhat easier to engage because, if they are approaching retirement, they are likely to be aware of the need to keep in touch with their finances. But engaging younger groups with the issue of retirement savings can be tricky, so the content must be exciting and relevant enough to avoid alienating them with information that they may not understand.
“Sessions should be interactive to ensure people switch on to it,” says Watts-Lay. “It can be boring if it is just some guy talking about finance. We often have to use emotive examples to make things easy to understand and relevant, rather than just technical stuff no one has a clue about.”
Stancombe believes communications should be delivered in the most relevant way possible, and modern technology could be the answer. “[For example], employers can communicate with graduates in ways they understand such as podcasts and intranet downloads,” he says. “It is more likely that people will want to access information if they are familiar with doing it that way.”
Employers must also consider carefully the timing of financial education. Using a specific event, such as the launch of a flexible benefits plan or share scheme, provides a good platform for offering targeted information. Moving from fixed benefits to a more flexible arrangement where the onus is on the individual to choose perks means that all employees will have to consider their particular needs.
Ashley-Jones says that information should be made readily available for them online in this instance. “If [employers] engage their workforce [with a launch] they will want to go to the website and read about their benefits,” he adds. “If they are not interested, they will not look.”
However, employers should ensure they do not run the risk of being seen as discriminatory when it comes to offering financial education. Segmentation will inevitably involve a certain amount of stereotyping, which can reflect prejudices, even if it is done in a methodical way, warns the CIPD’s Cotton. “My concern is [employers] can get into silos by saying people [aged] in their 20s are not going to be interested in pensions when that might not be true,” he explains. “If [employers] make an effort to talk to people about the importance of pensions, they might realise the importance of them.”
To overcome issues around stereotyping and risks of age discrimination, he suggests staff must be given access to all financial education opportunities, despite some content only being relevant to certain groups.
“It is important to find out from employees what information they want and then tailor it accordingly, rather than presuming. The danger with the lifestyle approach is people only find out about [things] that meet their immediate needs. It does not tell them what is around the corner,” he adds.
Perhaps employees’ future plans is another factor employers should consider when providing financial education†
Case Study: Tesco
Tesco recognises the varying needs of its 280,000-strong workforce by targeting workers approaching retirement and graduates fresh out of university with tailored information.
It holds approximately 25 pre-retirement seminars a year, which include speaker presentations, question and answer (Q&A) sessions and opportunities for one-to-one meetings with an independent financial adviser.
Together these cover topics such as saving for retirement, state pensions, taxation and the state benefits system, and details of relevant Tesco benefits, as well as adapting to retirement.
Last December, the retailer introduced a personal finance element to its graduate induction programme. Speakers from the Financial Services Authority give presentations advising recruits on how to manage their finances, and hosted Q&A sessions.
Louise Pocock, UK benefits manager at Tesco, says: “Good money management can make a real difference to people’s lives.”†
Case Study: Simply Health Group
The Simply Health Group tailored savings provision to better suit its varied 1,200-strong workforce after realising that staff were not joining its group personal pension (GPP) scheme due to other priorities.
To provide an alternative, the healthcare firm launched schemes to help staff save for a home or pay off student loans. The organisation said it could make contributions into these instead of the pension, on request.
It communicated these new alternatives to appropriate groups of staff using informal in-house seminars.
Gill Phipps, manager, HR projects, believes inviting employees to learn about how these benefits can help shows that the organisation is being supportive of its staff at every stage of life.
“We [were aware] we had a group of employees who were not paying into their pensions as they were trying to save for their first homes, so we targeted them and invited them to face-to-face [education] sessions to tell them how our First Home scheme works,” she explains.