Whether employees are saving for retirement or for a rainy day, for a lot of people investing can feel complicated and scary; something best left to those in the know. You only have to look at pension funds to see this in action; the majority of members remain in default funds. But are some groups of employees happier to take investment decisions compared with others?
Yes. According to the April 2019 Office for National Statistics report on Individual Savings Accounts (ISAs), there is a definite correlation between earnings and appetite for investing. Although 72% of all ISAs are cash ISAs, the research shows that higher earners are more likely to hold a stocks and shares ISA than lower earners, who favour cash ISAs.
So, as an employer how do you ensure that your workplace savings scheme is inclusive of all employees, regardless of earnings?
First, there needs to be an affordable minimum contribution. A lot of employees are going to assume that investing is only for those with a lot of money; it’s not for the average person. Certainly, in the retail market, minimum contributions probably seem unaffordable for many employees. However, in the workplace, it’s possible to invest as little as £10 per month, opening up investment opportunities to all staff, even those on lower incomes.
Second, allowing employees to make contributions through payroll makes the process of investing a lot easier. This is how pension contributions are deducted and employees are very comfortable with this method.
Costs can also be a barrier to investing; either because they’re too much or too complicated. Costs should be competitive and easily understood.
Employees shy away from complexity; if it feels too difficult then it is too difficult! A workplace savings provider should have a quick and easy way for employees to set up an investment and monitor it online.
Choosing investments should be equally easy. Anyone new to investing is going to find an endless list of investment choices intimidating. Ready-made portfolios that are automatically managed are a good option for inexperienced investors and helps to ensure inclusivity.
Employees have different reasons for investing; it might be for their first home or for retirement to supplement their pension.
To ensure that your workplace savings offering is inclusive of all employees and their varying circumstances you should offer the full range of ISAs including, lifetime ISAs and junior ISAs. And for higher earners who may max out on their annual ISA allowance, a General Investment Account (GIA) should be available.
Financial education in the workplace is fast becoming the norm. There’s no doubt that it helps employees overcome barriers to saving and investing, and ensures that these savings opportunities are open and accessible to all.
Even once they’ve invested, most employees will still benefit from ongoing support to help them understand what’s happening with their investments and to help them decide if they need to make any changes. As such, employers should choose a workplace savings provider who can support employees online to maintain the inclusivity of the workplace savings offering.