Help your workforce manage debt

With a pattern of low savings rates and rising debt levels - what can employers do to help employees struggling with their personal finances?


In the UK, average household debt currently stands at £58,948*.  There has also been an increase in average total debt per adult of £898.71* in the year to November 2018.  

It looks like things are forecast to get worse, as according to the Office for Budget Responsibility’s forecast, household debt is predicted to reach £2.258* trillion in Q1 2022.  

There isn’t much better news for savers either, as the average cash ISA rate in November 2018 stood at just 0.88*%, in contrast to the average credit card interest rate which is 18.69*%. 

Debt isn’t just a finance issue as it feeds into all elements of a person’s life. Most people will be embarrassed by their debt problems and will tend to hide it from their employer and colleagues.

You may wrongly assume that it is just people on benefits or low incomes that struggle with debt. Research carried out by Neyber** found that 50% of workers in the UK are borrowing money regularly to make ends meet. 

Debt problems often lead to metal health issues, stress and depression which could have a detrimental affect on your workforce (especially if you do have 50% with money issues)! 

It’s not all doom and gloom though as there are things you, as an employer, can do to help:

Financial education

Financial education is a great way of helping all of your employees with their personal finances.  The way we do it at Lemonade is by segmenting your workforce by life stage, as they have different needs and priorities - find out more.

Promote EAP

Don’t forget to promote your Employee Assistance Programme! It’s there to help counsel your employees with practical advice on issues such as debt that may impact their performance at work.

Workplace loans

If you don’t already, you could look into offering workplace loans which allows employees to pay back the loan from their salary.  There are a number of providers offering a ready made solution such as; Neyber, Workplace Finance and Salary Finance for loans as low as 4.9%***. 

This helps simplify monthly budgeting for your employees, with the loan repaid from net salary**** before they receive it. This could prevent employees using payday loans, other high interest borrowing vehicles or act as a means of them repaying high interest debt. 

***On loans between £300-£5,000 over 1-5 years

****Net salary deduction, therefore no income tax or NI saving

Reducing travel expenses

You can help your employees to reduce their travel expenses by offering season ticket loans or cycle to work schemes.  It’s also a good idea to encourage a car sharing scheme - not only is this good for money saving, it is also environmentally friendly!

Retail / eating out discounts

There are many discount card schemes available through employee benefits to save money on eating out and shopping.  Encourage your employees to sign up to these cards so they can reap the rewards.

Promote childcare savings

For many, their childcare bill is almost the same size as their rent or mortgage! Make sure your employees are aware of the tax free childcare scheme from the Government which gives parents £2 for every £8 they put into their childcare account - up to £2,000 per year.  

Review their existing spending

Encourage your employees to complete a budget planner, like this one - Budget Planner.  

You could do a internal campaign to get your employees thinking about little switches they could make that would save them money such as:

  • Utility Bills / insurances - using comparison sites to get the best deal

  • Mortgage rate - when was this last reviewed? Fixed/Variable? Compare the market 

  • Supermarkets - could they save money by switching to Aldi or Lidl? 

Communication 

It’s great to have a good benefits package which includes help and advice for money worries, but if you aren’t telling your employees about it on a regular basis then it isn’t doing its job.  

Make sure you put a communications strategy in place to ensure your employees are engaged with their benefits package.  We have just launched a handy guide to creating your Employee Benefits Communications Strategy which you can download here.  

* https://themoneycharity.org.uk/money-statistics/

**DNA of financial wellbeing research - Neyber

Six steps to create your EB comms strategy

Six steps to create your employee benefits communication strategy

A recent study* found a third of employees want their employer to communicate more about the benefits available to them.

It is important to get the balance right when communicating to employees.  You don’t want to over / under communicate, bore or confuse them! 

We have created an easy to follow ‘Communication Guide’ to help you create your ‘Benefits Communications Strategy’ in six steps.  Download the guide here!

 
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The guide includes top tips, examples and a draft implementation timeline to get you started.  

Some of our top tips for engaging your employees include:

  • Use a multi-channel approach when planning your benefits communications strategy to achieve good engagement levels - variety is the spice of life!

  • Keep your communications timely, relevant and simple.  Don’t bombard your audience at one particular time of the year.  Make sure you are engaging them in a consistent and targeted way

  • Encourage communication from Senior Leaders as this nearly always achieves higher engagement.  Staff are much more likely to read something from their Senior Leaders over a faceless email from a department  

  • Don’t just communicate to new starters about your great benefits package!  Make sure you regularly communicate benefits to all employees on a regular basis.  You could send monthly alerts with quick, snappy headlines, as well as a quarterly newsletter

  • Make it fun!  You could plan a launch party for a new benefits initiative or run a quirky campaign to really grab your employees’ attention.  Then there is the good old desk drop option!  Employees will nearly always take notice of a packet of sweets with a note on their desk when they arrive to work in the morning.  


These are just some ideas to get your creative juices flowing!

To get started with your Employee Benefits Communication Strategy download your guide here!


*Study carried out by Canada Life Group Insurance



Our new Informed Pensions brand

Lemonade launches DB member options service for schemes

In the news! Our new Informed Pensions brand has been featured by Professional Pensions! You can see the article HERE.

We have just launched a new brand, Informed Pensions, to focus on the bulk DB member options market.

Informed Pensions aims to make retirement better through a unique combination of technology, advisers and great communications.  This provides a range of tools to help DB pension members fully understand the options available to them.

Our ethos of ‘simplicity and clarity’ runs through the work that Informed Pensions carries out, ensuring members understand the bigger picture when making important decisions about their retirement. 

Lemonade listened to market feedback in order to shape the look and feel of the new Informed Pensions brand to ensure it resonates with members of retirement age.

Working with employers and trustees to help DB members through their options at retirement, Informed Pensions offers impartial advice through a simple 3-step process. This ensures members get the appropriate advice as well as reducing risk for the sponsor.

David Pugh, Managing Partner, Informed Pensions said: 

“Our new brand has already helped deliver a number of significant new projects. Working with most of the big pension consultancies has given us the opportunity to create this new approach and better engage the target audience.”

You can contact Informed Pensions through their new website > www.informedpensions.co.uk

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Have you identified your top earners? (Video demo)

Have you started identifying your top earners to make sure they avoid any unexpected pension tax charges?

We can create a user friendly web portal for your company to effectively explain the Annual Pension Allowance to your top earners.  

The web portal allows them to assess their own situation and outlines the solutions available. 

Play the videos below to run through the steps.

Step 1

Start by entering your salary and contributions.


Step 2

Any other income such as a bonus goes here.


Step 3

These lower your income for Annual Allowance purposes.


The results…

Red light means stop – you are due a tax charge. Click on ‘What action can I take?’ for potential solutions.

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Next steps…

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‘Cliff Edge’ retirement unpopular with majority of today’s workers

Tips from our experts on enjoying a phased retirement

A recent survey* has found that half of over 50s shunned the traditional ‘cliff edge’ retirement, preferring to ease themselves in with a ‘phased’ approach.  This could mean drawing down some pension income to allow part-time working without compromising on total income.  

The appeal of a transitional approach allows workers to adjust the amount of time they work before giving up work entirely.  For example, if you can afford to retire age 65, then phased retirement might mean you can reduce your working hours from age 62 and stop work altogether at age 68.

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There are many pros of a phased retirement but also some cons to consider.  Our experts have detailed these below to help workers think about how they might like to take their retirement.

PROS:

      • INCOME ADJUSTMENT - most people will have a lower income in retirement than they do through their working life. Phased retirement can provide a middle ground that helps them to adjust gradually to living on a tighter budget and transition from building their savings and pension assets to living off what they have. This requires a sharp change of mindset for those who retire ‘cliff edge’.

      • EARLY RETIREMENT - if you could ordinarily afford to retire age 65 then phased retirement might mean you can reduce your working hours from an earlier age and stop work altogether later on.  Plus, some people actually like their jobs!

      • ACTIVE MIND – besides the financial changes, retirement involves a significant lifestyle shift. Some people can quite happily fill seven days a week with leisure activities.  However, many like to have some structure to their week, enjoy interacting with their colleagues. Working a lighter schedule can extend the number of years an individual can continue to work for.

      • FINANCIAL BENEFITS - if in good health workers are more likely to stay in employment longer which brings financial benefits as well as more time for leisure activities.  This means workers get the best of both worlds, benefitting mentally and socially from work, as well as continuing to receive an income and enjoying more leisure time.

      • GROW INCOME - continue to grow your retirement income, while enjoying the extra flexibility of a shorter week. Employer and personal pension contributions can continue AND you delay or reduce the need to access your existing pension savings.

      • PRESERVE CHILDREN’S INHERITANCE - by working part-time and delaying pension withdrawals or reducing what you’d need to withdraw if you retired completely, you preserve more of your pension pot.  This maximises the death benefits of a pension, providing an opportunity to pass more of your money to children/beneficiaries free of inheritance tax. 

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CONS:

      • TAX MAN – receiving pension income and income from employment could result in paying income tax at a higher rate.

      • MORE WORK LESS PLAY - continuing to work reduces the amount of time spent enjoying holidays and leisure activities whilst still in good enough health to do so.

      • MONEY PURCHASE ALLOWANCE – the money purchase annual allowance reduces an individual’s yearly pension contribution allowance from £40,000 (or 100% of salary) to just £4,000 in the tax year. It applies when you begin taking money out of your pension as a flexible income. You can do this when you reach 55.

        If the pension benefits are accessed flexibly, which is common in phased retirement, this reduces the amount that can be put into the pension. This will limit the scope you have to save for retirement and can even result in a tax charge if contributions exceed the limit – contributions from your employer count towards the limit.

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The Pension Freedoms have provided workers with more options in terms of how they access pension benefits. As a result, there are significant tax planning opportunities for those considering phased retirement which can help to mitigate the potential negative tax implications.

Lemonade’s Retirement Options Planner allows workers to input their pension information, so they can easily compare their three options (drawdown, annuity & cash out).  This clever tool also helps them to understand when they can afford to retire which can help with their decision on how best to take their retirement.

 

* Source:  Research conducted by Aegon in conjunction with Opinium, based on responses from 1007 UK workers aged 50+ earning £20k+ between 30 November and 6 December 2018.