Martha How: Olympian journey for benefits

Benefits have come a long way since the last London Olympics in 1948 and flexible benefits are pointing the way to the future

This comment is written by the sponsor of the Employee Benefits/Aon Hewitt Flexible benefits supplement 2012

The year 1948 was momentous for Britain and for benefits. London hosted the Olympic Games, the National Health Service (NHS) was founded and the basic state pension was introduced.

This year, amid the excitement of the London 2012 Olympic and Paralympic Games, and following on from the Queen’s Diamond Jubilee celebrations, the country’s health, pension and benefits system is under pressure like never before.

In the post-Depression era of 1948, benefits were very different from today, with state health and pensions provision for all Britons a challenging but essential part of the welfare state concept. That vision had come to fruition by the mid-1950s, and relying on the state and the labour market for jobs, healthcare and a basic pension was a reality.

But by the 1960s and through to the 1980s, the financial burden of this system had begun to bite. The state pension was able to prevent extreme poverty in retirement, but not provide an income replacement. The level of employer and employee pension scheme contributions increased, and defined benefit (DB) schemes grew. The NHS was still the premier provider of healthcare, with privately-funded treatment affordable for the minority.

Between the 1980s and 2000s, life expectancy increased by 16 years, resulting in a fast-growing population, spiralling levels of unemployment and, consequently, significantly higher social security, healthcare and pensions costs. During this time, state and employer attitudes to benefits started to change and a series of major shifts began.

DB pensions were closed in favour of defined contribution (DC) schemes, NHS waiting lists began to lengthen and medical insurance developed to bring private healthcare within the grasp of more people, especially when funded by employers.

Today, state-funded healthcare and pensions still exist, but the government is under severe pressure in continuing to fund them at current levels.

The requirement for staff to be automatically enrolled into employer and employee-funded pension schemes, with ever-increasing retirement ages, from next month will simply add to this pressure. Meanwhile, the private healthcare sector has grown and become increasingly costly, albeit funded by employers and employees.

So the landscape today is a far cry from what it was in 1948. Responding to this, more employers have developed flexible benefits schemes, which provide a range of attractive and appropriate options for employees and form an increasingly important part of total remuneration packages.

The most recent Aon Hewitt Employee benefits and trends survey, published in May, revealed that 52% of UK employers had implemented flexible benefit plans, with the top three most popular flexible benefits being the ability to increase holiday, bikes-for-work schemes and childcare vouchers. Flex plans are also expanding globally, with employee wealth plans being developed to counterbalance financial pressures, and communications using social media to keep pace with changes in staff behaviour.

In 1942, the concept of a state pension was called ‘a British revolution’. In 2012, globalisation, technology and the personal funding of employee benefits mean that we are in a similar state of radical change and metamorphosis in the UK, but in the form of ‘a global revolution’.

Martha How is a principal at Aon Hewitt

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