Buyer’s guide to financial education

Focus on facts

What is financial education?

The aim of financial education is to teach staff money skills. As well as a thorough grounding in employee benefits, such as how pensions and share plans work, workers are taught how to handle other finances, from tax planning to individual savings accounts (Isas). At its heart are seminars and one-to-one meetings, but schemes can include intranet communications, webcasts, podcasts, leaflets and DVDs. Gaining popularity is tailored education, which focuses on critical points in people’s lives, such as buying a home or pre-retirement.

What are the origins of financial education?

Originally offered by a small core of group pension providers a decade ago, it has grown into a huge industry.

Where can employers get more information and advice?

The government-run Money Advice Service gives free, impartial advice on financial education.
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Nuts and bolts

What are the costs involved?

The government-run Money Advice Service runs free one-hour workplace seminars on money matters. Financial services providers may also offer free sessions, although often with a view to increasing sales. Fees for
paid-for financial education range from a few pounds per head for a simple seminar to £1,000 per head and upwards for one-to-one meetings with an independent financial adviser (IFA).

What are the legal implications?

Financial regulation spells risks for organisations. Only people who are registered with the Financial Services Authority (FSA) can provide financial advice, so employers must ensure that they do not stray into the realms of doing so. Employers in the banking and IFA sectors may use in-house expertise, as long as they follow FSA regulations.

What are the tax issues?

Most employer-provided education about money is unlikely to attract a benefit-in-kind tax charge, but HM Revenue and Customs treats individual financial education as a benefit in kind. Pensions advice costing below £150 a year is exempt from tax, but very little personalised advice costs less than that, so the exemption is little used.

In practice

What is the annual spend on financial education?

No figures are available, but it is thought to be a significant amount.

Which providers have the biggest market share?

Exact market shares are not available, but the biggest providers include Anthony Hodges Consulting, Clarity, Close Asset Management, Life Academy, Money Advice Service, Origen, Retirement Education Services and Wealth at Work.

Which financial education provider increased its share the most over the past year?

Exact figures are not available, but anecdotal reports suggest financial services providers have done well in the corporate market because they are often free. The Money Advice Service’s free one-hour seminars are popular for the same reason, and it has worked with more than 1,500 employers.


There has never been a more important time for employers to make sure that their employees have a good understanding of their own financial affairs, explains Jenny Keefe

Financial education programmes are no longer just a way to help staff grasp the value of pensions. In some cases, they cover all aspects of handling money, ranging from mortgages to health insurance and different savings vehicles.

Martha How, reward principal at consultancy Aon Hewitt, says: “For years, employers provided employees with pensions education via their provider or in-house people. This fell short of answering broader questions, such as on income tax, share plans and other investments. With society’s increasing concerns about financial security, employers are seeing broader financial education as part of their duty of care.”

The financial education market still has much room to grow. According to the Employee Benefits/Alexander Forbes Benefits Research 2011, published in May, 17% of employers currently offer financial education as a core benefit to all staff and 5% do so to some employees.

However, a ‘perfect storm’ of factors could drive growth in the market, says Nick Rudd, corporate benefits director at wealth management provider Broadstone Pensions and Investments. “The Financial Services Authority (FSA) has prioritised raising employees’ financial literacy. The Pension Regulator has set out how it expects employers to govern pensions. Also, employees are used to what internet banking can do and social media’s power, so their expectations are higher. Employers have no choice but to react.”

Another reason to consider workplace financial education is the Retail Distribution Review (RDR), which will outlaw commission payments from pension providers to intermediaries when it comes into effect on 31 December 2012. RDR means workers will see exactly how much advisers are paid for advice, either through fees or employer-paid commission, although some employers may baulk at paying these. Gary Bradley, corporate development manager at independent financial adviser (IFA) AWD Chase de Vere, says: “We are seeing an increasing number of organisations interested in providing financial education, including some smaller ones.”

Financial education can also be a motivating factor for staff. According to Mercer’s November 2010 Employee Rewards, Benefits and Savings Survey, 86% of employees said they would like to receive financial planning tools for pensions and savings. Jeanette Makings, director of financial education services at Close Asset Management, says: “For individual employees, schemes provide them with unbiased information to improve their financial wellbeing. For employers, these offer a way to engage, retain and motivate employees and to highlight the benefits package.”

Choosing a provider

So what type of provider should employers choose? For years, a turf war has been fought between financial services providers, insurers, financial advice firms, accountancy firms, IFAs and government or charity advice services. Aon Hewitt’s How says: “The quality is variable. The financial services providers are likely to promote their own products; the others are likely to be independent, but more expensive. IFAs are often more focused on high-wealth individuals. It is a challenge, but the market is developing fast.”

Stuart Royston, chief executive of charity Life Academy, which runs financial training courses, says: “I see financial education as an educational scheme that will help people develop their financial understanding and skills. A lot of the sales promotion activity is simply that and does not, in my book, belong in the education category. In an ideal world, education is not linked to a product sale.”

Employers should ensure staff understand the options on offer, as well as the differences between financial education and financial advice, which can only be provided by those registered with the FSA. Helen Boylett-Smith, head of retirement options at consultancy Lorica Employee Benefits, says: “Staff should understand the different types of advice available. Banks and building societies are often tied to providing advice on their own products and IFAs will charge a fee or receive commission.”

A current big trend is the rise of tailor-made lessons, which are specific to a worker’s benefits or lifestyle. Jonathan Watts-Lay, director at financial education firm Wealth at Work, says: “Benefit-based education may include how to mitigate tax on a share scheme maturity to those affected by the new pension legislation. Life-stage [education] shows how combining benefits can help achieve personal goals, such as combining workplace discount vouchers with Isas to save for a deposit for a flat.”

Interactive approach

Experts are convinced that an interactive approach pays off. Neil Hawkins, financial education manager at life and pensions provider Friends Life, says: “Our training includes use of interactive learning techniques to sustain people’s interest, such as playing cards, group discussions and flipchart exercises. These workshops are often in conjunction with standard communications, such as pension updates.”

As providers battle to stand out in a crowded marketplace, the other craze is for online tools and social media. Broadstone’s Rudd says: “In the future, we will see more use of the web via employers’ flexible benefits sites – modellers, links to providers’ sites and wealth management tools. Smart-phone applications will be the next development, allowing employees to access benefits data on the move.”

So what should be on the curriculum for workers? Given the removal of the default retirement age, one hot topic is flexible working beyond retirement. Lorica’s Boylett-Smith says: “Pre-retirement seminars help employees focus their minds on the best time to leave the workplace or, indeed, whether they can afford to leave. This may help generate discussions with HR colleagues to agree a strategy for leaving.”

Next year’s dawn of pension reforms will also bring new challenges. Friends Life’s Hawkins says: “Some people in the industry consider auto-enrolment a replacement for communication and education. But for it to be a success, education remains important.

“Auto-enrolment is a nudge for people to start saving, but financial education avoids ill-informed, unhappy investors who do not understand what they have invested in or choose to opt out.”

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