Whereas many employers and their HR department are heavily focused on aspects of training to do with role development and practical skills, many employees lack basic knowledge about their own financial planning.
The CIPD suggests that a lack of education about pensions is putting certain people at a disadvantage. It has looked at figures from a report commissioned by the Chartered Institute for Securities and Investment.
In the report:
- 10% of 18 to 24 year olds did not know what a pension was
- Compared to their male counterparts, almost 80% of female survey respondents were less aware of employer pensions
“There’s a gap in understanding, between expectations and reality,” says Philip Clegg, Managing Director of Oak Tree Financial Training. “The report reveals a sometimes startling level of unawareness.”
Unprepared for the Future?
“Many people don’t know the amount they pay into their pension and have not checked their pension’s status,” suggests Philip.
“This unawareness translates into a failure to act around improving pensions. In fact, many of those surveyed did not realise that their living standards might drop after retirement.”
“Most workers retiring, hope to fund this through their workplace or state pension. But at the same time, they are failing to understand what this will mean in terms of what they’re paying in now.”
This lack of preparedness is echoed in research from Fairstone, one of the UK’s largest chartered financial planning firms.
“Fairstone’s research reveals that over 50% of its respondents do not have a retirement plan in place, and nearly a quarter have no savings or investments at all”
What role, if any, should HR play in raising financial awareness and knowledge levels around pension planning in the workplace?
How Can HR Help?
“It is in everyone’s interest, employer and employee, to ensure people are better educated about their finances, and about retirement.
Financial worries are a major cause of stress, which can spill over into the workplace, affecting attendance and productivity”
There is also an element of employee engagement involved in improving financial education for individuals at work.
“You’re demonstrating a keen level of interest in your employees’ wellbeing if you’re willing to help them plan for their future when they leave you. You’re adding value to their experience and giving them something of lasting value.”
HR Departments do not themselves have to become financial experts to do this, as Philip explains.
“The vital thing is to get the essentials across clearly, and point individuals in the direction of sound retirement planning. HR departments can commission external support from a professional independent training company.”
It is vital to encourage employees to look at their retirement plans systematically, exploring their options and finding out whether they can improve on their pension provision on retirement.
“Investing in your employees’ financial education shows them you’re investing in their future,” concludes Philip. “That sends out powerfully positive signals.”