On the go: A report has questioned whether employers truly understand their employees’ financial priorities.
According to research by workplace platform provider Smarterly, there is a mismatch between employer’s perceptions and reality.
It found that 66 per cent of employers say pension saving is the top priority for all of their staff, but fewer than 10 per cent of millennials say that saving for retirement is their number one financial concern; many prioritise saving for their first home over contributing to a pension.
The report highlights the rapid change in the demographic shape of the UK’s workforce; by 2020, some 50 per cent will comprise of millennials, aged between 22 and 37.
Smarterly urged employers to consider the financial wellbeing of their staff from “cradle to the grave” and to provide robo-guidance or robo-investing from a third party, with pensions as just one of a range of options.
Commenting on the report, Michael Johnson, an adviser to Smarterly and research fellow at the Centre for Policy Studies, said for millennials, “locking savings away in pension pots until the age of (at least) 57 is a major deterrent to saving but, prior to 2017, not saving through a pensions vehicle meant missing out on an upfront incentive (tax relief)”.
He pointed to the lack of engagement with traditional pensions: “An extraordinary 39 per cent of auto-enrolled scheme members are unaware that they were a member of a workplace pension scheme. Ninety-five per cent had never tried to change their fund, 91 per cent did not know where their funds were invested, 80 per cent did not know how much was in their pension pot and 34 per cent did not know who their pension provider was. Very few have identified a beneficiary, should they die.”
He advocated that employees should be offered an alternative, that of having their employers’ contributions paid into a workplace Isa. This could take the form of a Lifetime Isa for millennials, and a stocks and shares Isa for older employees.
He said for most millennials, a Lifetime Isa is better than a pension pot. “For basic-rate taxpayers (over 90 per cent of the under-40s), the Lifetime Isa’s 25 per cent upfront bonus fully compensates for basic rate income tax paid before contributing to a Lisa,” he said. “In addition, post-60 drawings from a Lifetime Isa are entirely tax free. Consequently, although the Lisa’s tax treatment is ostensibly TEE, for basic rate taxpayers it is effectively entirely tax-free.”
