“In a world where you can’t sack people at 65 anymore, managing them out at the right time is important. There’s potential mutual benefit there I think,” said Webb, who was minister of state for pensions from May 2010 to May 2015, and a Liberal Democrat MP from 1997 to May 2015.
He added that workplace financial education is becoming increasingly valuable to employees, and that employers offering this may benefit from improved retention.
“I think workplace advice will come to be valued more as a benefit,” he said. “People have been reading about new pensions freedoms every day but it will be baffling them. The government has introduced a whole raft of jargon. So [employers offering advice] is a great public service but it is also a great service to those individuals.”
“What we can’t do is abandon people and say ‘here’s a sophisticated choice, now you’re on your own',” he said, pointing to the government's creation of advice portal PensionWise.
Regarding further changes to the pension offerings landscape, which might be implemented to combat the fact that many people’s standards of living will fall post-retirement under the new system, Webb stated that US-style auto escalation might be the way to go.
“Most people will see a significant drop in their living standard, so the government will have to think about whether its contribution is enough,” he said.
“What you might do is something that’s very popular in the States where when someone starts a job you agree that when they get a pay rise that goes into their pension. That way they get to a sensible amount without much pain, because it’s money they never had.”
Webb added that further changes he predicts as part of the July Budget include a limit on pension tax relief for anyone earning more than £150,000 – pledged in the Conservative manifesto – and changes to salary sacrifice thresholds.
Also speaking at Secondsight’s HR Masterclass was compensation and benefits director for UK, Ireland and Israel at Oracle, Michelle Bradshaw. She agreed with Webb that workplace financial education would help employers resource for the future.
“It sounds brutal but this is about succession planning,” she said. “Otherwise in 15 to 20 years the smarter employees who have been working hard to make sure they can retire early will leave, so you’ll have a huge outpouring of talent, and you might only be left with those less high-performing workers.”
She added that framing the issue of financial education in these terms would help achieve senior buy-in: “You have to project forwards. If you’re saying ‘when are people going to retire and how are we going to manage that?’ that’s easier to present as a business proposition.”
Bradshaw further explained that in her experience there is no correlation between employee intellect and them being personal finance savvy.
She said it was best not to assume certain demographics would want help with particular issues, but hold, as Oracle does, broad awareness raising sessions where people can decide what’s relevant to them and select smaller, more interactive workshops accordingly.
Of the wider benefits to Oracle of its financial education programme besides succession planning, Bradshaw said: “It’s about how people feel working for your organisation. There is a natural progression from health and wellbeing, particularly from mental health and stress initiatives, to financial education.”
