As the country emerges from recession, employers are being urged to provide financial literacy education to their staff, both to support those left in financial difficulty and to help prevent a recurrence of the types of borrowing that contributed to the economic downturn. Sarah Wray looks at the options.
Some may question whether financial literacy training is an employer's concern. However, research highlights the issues that financial problems can cause at work. A survey last year from insurer Axa found that 5% of people say they have taken time off work during the past year because of money worries, while 70% admit spending time thinking about their finances instead of working.
Since 2007, Axa has allowed its staff 15 minutes each week to manage their finances using its 'My Budget Day' online tools, which are available free to anyone. Following the initiative, the company has reported a drop in absence levels and improved employee retention. It has called on other employers to offer financial literacy support to staff.
Providers of workplace financial literacy education schemes include financial services companies, government bodies, employee assistance programmes and charities. There are delivery methods that suit businesses of all types, from large-scale seminars to online programmes that staff work through at their own pace.
Financial education is about providing employees with factual information, rather than advising them on specific decisions. If employers choose to supplement financial literacy education with access to advice, the adviser needs to be regulated by the Financial Services Authority (FSA).
Energy company E.ON introduced a financial literacy education scheme two years ago, and decided to use the FSA's hour-long 'Making the Most of your Money' seminars.
Ant Donaldson, senior specialist in employee benefits at E.ON, says the company considered other options but chose the FSA offering for its cost-effectiveness and impartiality.
The free seminars and supporting materials provided by the FSA give broad information on various personal finance issues such as budgeting, debt and pensions. At the start of the initiative, E.ON carried out a staff survey to assess employees' financial wellbeing and knowledge. Using the results, it worked with the FSA to tailor the generic seminar to meet its needs.
"The sessions are focused, depending on the nature of the group that is being presented to," says Donaldson. "It might be a group of people who have been with us a while and are closer to retirement, or a younger group, such as new graduates or apprentices, who are starting out and more interested in budgets and debt management."
Feedback from the 2,000 E.ON staff who have so far attended the sessions shows that 82% found the sessions were useful or very useful, although a few people commented the sessions were a little too basic. Despite this, 93% of people said that their understanding of financial matters improved after the sessions and 90% said they intended to take action following their attendance.
Donaldson adds: "We now periodically promote our financial education programme, and once we've got enough interest in a particular session, we will run it again. After a couple of years, interest has dropped off somewhat, but it's been really worthwhile. It's definitely something we will re-launch in a couple of years because the need never really goes away, and as you move through different stages in your career and your life, your needs and interests may change as well."
Some companies find it beneficial to combine different approaches to provide the best fit for their staff.
Financial services group Aviva decided to use the FSA seminars alongside an online solution from charity Life Academy.
Its 'Learn About Money' website is free, while there is a small charge for workbooks and for businesses to place the website on their own intranet, which Aviva does. As employees work through the website and the workbooks, they cover areas such as investment, tax, attitudes to money and saving and borrowing.
Aviva set up its Financial Literacy Academy 18 months ago. It is the latest of five learning academies at Aviva that focus on core organisational skills.
Dougie Still, Financial Literacy Academy manager, says Aviva's combined approach means staff can attend the seminars and then use the online tools and workbooks to focus on their specific areas of interest at their own pace.
He says: "We believe that if you don't understand your own finances, you won't understand the company's finances. Also, we offer this to recognise the hard work that employees carry out and we feel that it's the right thing to do."
Financial literacy education can also be useful for giving staff information on the financial implications of a specific event, such as a change in pension scheme, redundancies or a new benefits package.
Donaldson at E.ON says: "Another reason we began using the FSA seminars was that we were in the process of launching our flexible benefits scheme. We didn't want people to look at the scheme and think: 'well, it looks good but I'm not entirely sure what it all means'.
"In addition, we found that in the past five or six years, the take-up of our pension scheme with new joiners was lower than it had been in the past. We're very keen for employees to join our pension scheme and we wanted to push understanding. Since we started the financial education programme, more people at E.ON are taking up a pension. The rate over the past year or so has been about double what it was in the previous four or five years."
Pensions are an often poorly understood area of finance, particularly by younger members of staff. Additionally, with auto-enrolment being phased in from 2012, employers are likely to be looking for ways to provide information to staff.
Most pension providers offer pensions support to their members and there are also independent options available.
Financial education: top tips
Find out your staff needs so you can tailor the education – Axa's My Budget Day site allows employers to create an employee finance health-check survey.
- Have a dry run of the seminar or online course so it can be tweaked if necessary – include people such as employee representatives.
- Consider capturing seminars on video for staff that can't make it.
- Promote the campaign – you could use payslip messages, team briefings, posters or e-mails.
- If staff are using online tools or workbooks, offer private places and computers for them to work.
- Collect feedback.
- Allow staff to take part in financial literacy education activities in paid work time.
Retailer Superdrug decided to provide more information after a consultation on the closure of the defined benefit section of the pension scheme highlighted gaps in employee knowledge.
After considering various options such as training a current member of staff or providing seminars from a fund provider, Superdrug decided to go with the free sessions provided by the Pensions Advisory Service, particularly as they were able to offer support around the country – Superdrug has more than 900 stores. This year, the Pensions Advisory Service has delivered more than 30 workshops to Superdrug staff.
"We offered about 850 members the chance to come over to the defined contribution section," says Paul Chadwick, head of HR services at Superdrug. "During the consultation period, employee representatives raised concerns around people's knowledge level and understanding of pensions. We realised that as a company we needed to do something more than the written communication we were already offering."
Superdrug is now considering rolling out a larger programme of financial and pensions education. Chadwick adds: "One of the things we've learned from this exercise is how much people value the opportunity to have financial education and support."