There is a growing belief that Britain's pension crisis could be solved in the workplace. If this is true, then it is not only good news for society generally but it also presents a fantastic opportunity for financial advisers.
The view is evolving that people could be encouraged to think more about their finances while they are at work, given that they are already used to dealing with pay, income tax and occasionally pensions and other benefits in connection with their jobs.
This is good news for financial advisers for two reasons. First, they have already recognised the importance of the workplace in marketing pensions, which is why group DC business has grown so dramatically in recent years. Second, in all of the discussion about workplace marketing, there is a strong recognition that face-to-face financial advice will be essential.
There is a growing band searching for the holy grail that would encourage people to save more for their old age. They include the Government, regulators, financial companies, trade bodies and consumer groups.
They are being challenged by the repeated confirmation that few people are interested in financial services – and even fewer understand them. Not surprisingly this makes individuals reluctant to think for any length of time about their financial arrangements.
Without advice, stakeholder pensions have not worked well, and will not work well in their intended market. This has brought it home to policymakers that good intentions are not the same as delivering real solutions to difficult problems. Even a workplace environment for the financial discussions will not deliver that on its own, access to financial advice is essential too.
What will drive this workplace revolution? The mixture of factors will include people's willingness to think about finances at work, particularly in company time. Consumer research from the NAPF has also suggested that people are better disposed towards products or services that are offered, or organised, by their employer.
From a distribution point of view, policymakers like the access the worksite offers to large groups of people. These cover a wide range of incomes but are also logically subdivided into clusters of similar incomes by their actual jobs. This practicality is helpful to advisers and to product providers, perhaps making it possible to serve the less well-off in the workplace, whose business could not have been viable on an individual basis.
The actuarial profession commissioned an inquiry, chaired by former CBI chairman Sir John Banham, into the subject. He concluded that “British society is sleep-walking into a financial future for which it is ill-prepared.”
However, he strongly supported the idea that employers should be instrumental in the provision of financial advice for their employees. His initial findings also suggested that employees like the idea, as long as confidentiality is assured.
The ABI is so enthusiastic about the concept that it is proposing tax breaks for employers who make pensions available in the workplace and also for those who contribute to employees' schemes.
The TUC likes the idea because it will make financial advice easily accessible for people who would not otherwise contact an adviser, either because they lack the time or the confidence. It also hopes that group arrangements would encourage group discounts.
The NAPF research included how employees might react to this financial dialogue. The results indicate that employees are likely to be more receptive to a financial service that is being offered through an employer.
It does not take a huge leap of imagination to see these developments leading to people managing their overall finances from work, with some aspects provided by their employers and some added on themselves. This offers people a level of organisation and planning that is currently very rare.
It also leads the way to employers offering flexible benefits packages, allowing employees to choose the mix and range of job-related benefits, up to agreed levels, for themselves. These are facilities already offered to senior employees in some larger companies but they could soon be extended more broadly and into much smaller companies.
Of course, there are challenges to workplace financial advice. Employers are concerned that they should not be held liable for the advice they help to provide. Less legalistic, but still relevant, is that employers might lose some credibility if they introduce products or services that are inferior to those their staff could have found independently in the market.
Advisers are also worried that talking to groups of people at work might deliver good advice to the majority but be wrong for a small minority. One such group is those on lower incomes, who could qualify for means-tested benefits at retirement. For many of these individuals, the benefits of small personal pensions would be wiped out by a corresponding loss of state benefits.
Scottish Life believes this could be addressed by allowing these people effectively to cash in their pensions, net of tax, if they had not been of any benefit to them. This “money-back guarantee” would mean these individuals would have benefited from their savings by getting a lump sum back and the advisers would still have given them good advice in encouraging them to save.
We also believe that the concept of worksite marketing of financial services is the most exciting breakthrough yet in the campaign to encourage people to save. We are cheered by the levels of support that it already enjoys. Advisers should also be encouraged that, if this really is the answer, then they will play a huge part in its success.