The case for workplace financial education

Charles Cotton, CIPD Performance and Reward Adviser

Central London Reward SIG

15 October 2012

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The plan

• Talk about the business case from an employer perspective

• Hand over to Jeremy Mindell from Henderson Group

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Outline

Definition

1. Employee value and appreciation

2. Talent

3. Wellbeing

4. Communicating change

5. Business environment

6. Managing risk

7. Making the world better

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Definition

OECD definition as the:

‘process by which financial consumers/investors improve their understanding of financial products, concepts and risks, through information, instruction and/or objective advice, develop skills and confidence to become more aware of financial risks and opportunities, to make informed choices, to know where to go for help, and to take other effective actions to improve their financial well-being’.

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1. Employee perceptions and value

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Employer expenditure on reward is significant….

John Lewis Partnership , 2011

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..and set to rise through AE

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Employee appreciation

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Sophistication

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The power of communication: bonuses

Net satisfaction scores

Employees who got a bonus and reported that they were given an explanation

+74

Employees who got bonus and reported that they were not given an explanation

+21

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The power of communication: pay increases

Net satisfaction scores

Employees who got a pay rise and reported that they were given an explanation

+71

Employees who got a pay rise and reported that they were not given an explanation

+33

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The power of communication: freezes

Net satisfaction scores

Employees who got a pay freeze and reported that they were given an explanation

-15

Employees who got a pay freeze and reported that they were not given an explanation

-65

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Employee understanding

Impacting on:

• Appreciation

• Engagement

• lower employee turnover,• lower absence• high performance

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2. Talent

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Current and future talent

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3. Wellbeing

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4. Communicating change

Changes:• Automatic enrolment,

from October 2012• Real time information,

from April 2013• Universal Credit, from

October 2013

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5. Business environment

• help employees appreciate the economic environment

• and business contexts.

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6. Managing risk

tPR expects• employers to take

more responsibility for DC

• offer education and assistance to employees

Employee insolvency

Fraud

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7. Making the world better

• OECD, poor financial literacy associated with:• A lack of trust in financial

institutions • Mis-selling of complex

products• Undercoverage of risks• High levels of indebtness• Low levels of retirement

saving• Higher costs for

disadvantaged groups

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