Is “No advice” the best advice for employers?

Back in the halcyon days of yesteryear when everyone walked around much more quickly than they do now, and usually in black and white, employers had these near mythical entities called “Final Salary pension schemes”. People were automatically put into them when they started work and at retirement they received a nice cash sum and a guaranteed income for life. And employers offered no advice because, frankly, they didn’t need to. What could possibly be better than what they were giving staff and, besides, there was very little choice in taking the money anyway.

Colour TV came along and we all started moving at a more realistic pace. And with it (admittedly a good few years after the onset of colour TV) final salary pension schemes became millstones around employers’ necks. The race was on to ditch them, as far as possible, and replace them with something more affordable for the employer but, unfortunately, was inevitably a poorer deal for employees.

Cue money purchase schemes – that is to say, a glorified savings account where you knew what went in but had little idea about what would come out. There was a bit more choice in how you could take benefits but the general rule was that the employee would buy an annuity and, again, receive a fixed income for life.

Employers still didn’t see the need to provide advice and, furthermore, legislation had been introduced to say that if you weren’t formally registered as a financial adviser, you risk prosecution if you are seen to give advice. A few employers partnered with trusted (and registered) advisers but most threw their hands in the air and used the legislation as a shield to hide behind.

For larger companies, the norm became having one of the big Employee Benefit consultancies to advise the employer on setting up their various pension schemes, group life, income protection etc. (for which some pretty eye watering fees would be charged) and the employees were left to seek advice of their own outside the company.

And then came 2015 and Pensions Freedoms. Choice was the byword. Get to the minimum age (55) and you could start taking your benefits in almost any way you wanted without the need to tie yourself up in financial products that you didn’t understand and, more importantly, didn’t want because they were such poor value (annuities had been massively compromised by the lower interest rates following 2009 and, even more significantly, the fact we are all living longer than ever before).

The need for advice to employees has increased exponentially. Employers tend to still have the same views they ever had, however.

But what if we replace the term “advice” with “financial education”? Would employers be more willing to offer “financial education” to key groups of staff – those nearing retirement and executives with issues around annual and lifetime allowances? Would that suddenly appeal to the desire of many employers to act benevolently without putting themselves in the firing line of legislation?

Providing financial education with a trusted partner to ensure staff receive unbiased generic advice on their situation with the option to take it further on a personal basis, if required, is one of the ways an employer can stand out from the crowd. And it clearly draws a line between the employer and the provider of the advice/financial education. So, what’s not to like?

Needless to say, Richmond House Corporate Services can provide the financial education your employees desire. We have done it for many years with our existing corporate clients and understand the subtlety of presentation required.

Merely having a pension scheme is no longer the competitive advantage it was before Automatic Enrolment. What you provide over and above your legally required minimum is what will set you apart as a caring employer mindful of the needs of your staff.


Peter Murphy Dip PFS


Auto Enrolment is not regulated by the Financial Conduct Authority.