Three-quarters (75%) of employee respondents have not received financial education from their employer to help them understand what savings choices exist and what is best for them, according to research by Close Brothers and the Pension and Lifetime Savings Association (PLSA).
Its The lifetime savings challenge report 2017, which surveyed 1,000 employers with 200 or more employees and 2,009 employees from organisations with 200 or more employees, also found that 48% of employer respondents currently offer some form of financial education, and 20% plan to introduce it in the next 12 months.
The research also found:
- 65% of employer respondents think the responsibility for improving employees’ financial wellbeing lies jointly with them and their employees.
- 40% of employee respondents are confident in their ability to choose the right financial product to help them achieve their savings ambitions.
- 42% of employee respondents who are eligible to save into a lifetime individual savings account (Lisa) do not do so because they feel they do not know enough about the product.
- 53% of employee respondents aged between 18 and 34 are either saving for retirement or buying a house as their main savings priorities.
- 35% of employee respondents who have received financial education feel that it has been useful in guiding their immediate, medium and long-term saving decisions.
- 33% of employee respondents are saving less than £50 a month, and 20% of these respondents are not saving anything.
Jeanette Makings (pictured), head of financial education at Close Brothers said: “There is a looming savings crisis. Not only are people failing to save enough, but many simply don’t understand the different savings choices available or how to evaluate which ones are best for them. Worse than that, the industry is not geared up to help them. Product providers can explain their own products, and comparison websites may be helpful to compare products of the same type, but there are very few providers able to help individuals look across the savings landscape in its entirety and choose what’s best for them.
“Employers have a key role to play in solving this lifetime savings challenge, but despite them seeing it as their responsibility to enhance the financial education of their workforce, far too few are adequately addressing the issue amongst their employees. If we want employers to be adding real value, their efforts need to reflect the challenges that individual employees are facing at each stage of life.
“A huge part of the challenge therefore, is to encourage the provision of good financial education in the workplace that looks at savings as a whole and the different options available. Employers are hugely trusted and perfectly placed to close this knowledge gap. By working closely with them to develop impactful education, we can help employees secure a solid financial future for both themselves and their families.”
Nigel Peaple, deputy director of defined contribution (DC), lifetime savings and research at the PLSA added: “Regular income from full-time employment is the building block for many people’s financial stability so it makes sense that they would also look to their employers for support with financial education, pensions and lifetime saving. [This] report highlights not only the low levels of saving amongst the workforce but also their interest and desire to do more.
“It also raises important questions about the role employers can play in helping employees to be financially prepared for retirement. It is encouraging to see that almost two thirds of employers believe that it is their responsibility to help employees to make the most of the benefits packages they offer. We hope that [organisations] will feel able to help their employees reach their savings aspirations.”