creative employee benefits Workplace Financial Education More a necessity for employers than a cost August 2015 quarterly newsletter

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1 creative employee benefits quarterly newsletter August 2015 Workplace Financial Education More a necessity for employers than a cost

2 Employee Benefits News Creative Employee Benefits is committed to helping employers provide worthwhile and valuable benefits for staff. More and more, employers are looking to provide cost effective benefit solutions that make a real positive difference for their employees. In this issue, our lead article focuses on the benefits of employers providing financial education in the workplace. Financial education is a broad topic and can cover many aspects of every day modern living. We hope therefore that you find this and the other articles in this Newsletter interesting, relevant and informative and help you focus on what is really important for you. As Head of Employee Benefits, I am keen to get your feedback or suggestions for future articles and if you would like to discuss any of the issues in this Newsletter, then please contact your usual consultant or give us a call. Paul Doble Head of Creative Employee Benefits Articles in this issue: Workplace Financial Education More a necessity for employers than a cost Occupational Pension Schemes - A way out of the ever extending regulatory requirements The Rise In Insurance Premium Tax Does this mean the end to Private Medical Insurance?

3 Workplace Financial Education More a necessity for employers than a cost Neil Gough Client Services Director A high number of recently published surveys show that education is required to help people make the right financial planning decisions. What is also evident from such statistics is the increasing buyin from employers to have educational sessions carried out in the workplace and the benefit this can bring them and their staff both in the short and long term. Financial Education Programmes have been around for well over 30 years, initially providing help and guidance on such topics as redundancy packages and pensions. Nowadays, with the range of employee benefits provided by employers being greater than ever before, and the variety of savings and protection products on the market showing no sign of contracting, the subjects covered by Financial Education Programmes has extended well beyond it s initial focus. The increase in demand for such educational programmes could be down to the continually changing regulatory landscape, for example with regard to pension automatic enrolment, or the new pension freedom opportunities. It could also equally be as a result of a growing volume of individuals requiring help in understanding how to effectively plan their financial affairs, focusing particularly on debt management, planning for retirement, or indeed saving for a deposit they need to take the first step on the property ladder. For employees, being better financially educated means they are better placed to make good financial decisions, whilst becoming more financially secure, in turn improving their work life balance, health and well being. In fact, with research conducted by Mind finding that debt or financial problems accounted for 30% of overall causes of sickness, and with over 15 million sick days taken due to stress, depression and anxiety in 2013, educating employees on how to handle their finances seems like a good thing to do. For employers, any reduction in absenteeism caused by stress is obviously beneficial. Equally important is to engage employees in Financial Education Programmes as soon as possible so that they are better able to make the appropriate decisions. This includes planning for retirement so that they are able to stop working when they want, reducing the likelihood of employers having increasingly unhappy and demotivated staff who want to retire but simply can t afford to do so. Employers can choose to segment their workforce and organise tailored sessions for different staff, potentially running sessions on different topics for different people, with the aim of extracting the maximum benefit from any programme they put into place.

4 For employees, being better financially educated means they are better placed to make good financial decisions, whilst becoming more financially secure, in turn improving their work life balance, health and well being. Financial education sessions can be delivered via one to one sessions and group presentations or workshops. They can cover such as things as retirement planning and investment options, through to debt management and tax planning. In fact it is easy to make a case for sessions being run on pretty much any aspect of savings, investment or protection. With all of Creative s face to face advisors qualified to Diploma Level as a minimum, we are perfectly positioned to be able to work with you to put in place an education programme for your employees that fits with your budget. Now couldn t be a better time to reassess how you engage with your employees and help them make sound financial decisions. To discuss putting in place an appropriate Financial Education programme for your employees please contact us on , or info@creativeeb.co.uk.

5 Occupational Pension Schemes - A way out of the ever extending regulatory requirements Paul Doble Head of Creative Employee Benefit For many of those employers who have such legacy schemes, it may be that the sponsoring employer, together with the Trustees, feels that they are unable to take on the further time and expense burden of these requirements, and that now is the time to simplify their arrangements with a corresponding buyout, or wind-up of the benefits held in the occupational pension scheme. Conducting a buyout involves transferring the member benefits held in an occupational pension scheme to a series of individual pension policies, typically held with the same insurance company. A wind-up works on similar lines but with scheme members given additional options as to where their accrued funds can be transferred, or how benefits are taken. The world of employer pension provision has changed a great deal over the years - from occupational final salary and defined contribution schemes, to automatically enrolled Group Personal Pension Plans. Group Personal Pension Plans provide an opportunity for the employer to provide competitive pension arrangements without tying themselves up in Regulatory Knots. It is this, the Regulation, that has driven medium and small employers to provide ongoing pension provision through contract based schemes like Group Personal Pension Plans, but to also simplify legacy occupational pension arrangements they may have. From April 2015 the position worsened for Trustees of defined contribution occupational pension schemes as they now face: new governance standards; requirements to issue statutory pension freedom communications to members, and; new legislation that imposed maximum charges

6 Under both routes, the Employer, and Trustees, are discharged of any further responsibilities associated to such benefits once the transfer has been completed. As well as the opportunities that a buyout or wind-up can afford both employers and Trustees, the member may also be afforded wider options. Under the new pension arrangement to which the fund has transferred, they are likely to be able to take advantage of the new pension freedom options, which often will not have been available within the rules of the previous occupational scheme. When conducting a buyout it is incumbent on the Employer, and Trustees, to ensure that they achieve the best deal possible for the scheme members, something which must also be present when setting the default offering when conducting a wind-up. Members should always seek financial advice when their pension funds are being transferred as the retirement benefits they receive from such funds will be dependent upon many factors which are now under their control - not that of the Employer or Trustees. Clearly, this area is highly technical for both the employer and member alike. While Automatic Enrolment has been the focus of large numbers of employers over the last few years, these employers are now able to take a fresh look at the benefits they provide, whilst also simplifying previous occupational pension arrangements as far as possible. If you have any such legacy pension schemes and have not recently looked at your options as the Employer, or Trustees, we recommend that you do so now. Please contact us on , or info@creativeeb.co.uk, to see how we could be of service to you. Group Personal Pension Plans provide an opportunity for the employer to provide competitive pension arrangements without tying themselves up in Regulatory Knots.

7 The Rise In Insurance Premium Tax Does this mean the end to Private Medical Insurance? Steve Richardson Group Risk Specialist In the Summer Budget delivered by George Osborne on the 8th July, the Chancellor stunned the insurance industry with this statement: Britain s Insurance Premium Tax (IPT) is well below tax rates in many other countries. I am therefore today raising insurance premium tax which applies to only one fifth of all premiums to 9.5%, effective from this November. Prior to the Summer Budget, IPT stood at 6% on all general insurance premiums, and so the announced increase equates to a massive 58% providing the Government with an expected annual increase of 1.6bn in funding. As Private Medical Insurance (PMI) is classed as a general insurance product, this change to IPT will directly impact the premiums paid by companies in respect of this often valuable Employee Benefit. Each year, PMI premiums suffer medical inflation increases of around 4% in the Corporate scheme market (those schemes with 250+ employees), with the increases in smaller company market (between employees) typically being between 10% and 12%.The increase in IPT is expected to result in a compounded increase in existing private medical premiums of between 7.5% and 15.5% for At a time when many employers need their staff to be healthier, more engaged and more productive than ever, and with increasing pressures on the NHS and waiting times, increasing the rate of IPT potentially makes valuable medical insurance less affordable to many employers, with a consequent impact on productivity, profitability and, ultimately, an increased burden for care that the NHS may be asked to pick up. The impact of increasing medical insurance premiums is not only felt by an employer, it has an impact on employees taxable benefit too, as IPT is included in an employee s overall P11D liability. The average UK PMI premium, is around 550 per year, so a basic rate tax payer may find they face an increase in their P11D liability of between 9 and 18 a year.

8 The impact of increasing medical insurance premiums is not only felt by an employer, it has an impact on employees taxable benefit too, as IPT is included in an employee s overall P11D liability. So does this mean that providing PMI benefits for your employees is no longer a viable option? Certainly Not! By acting now there are a number of ways to reduce the possibility of increased premiums, for example: Employers considering introducing PMI for their employees should act now to ensure that the IPT increase is delayed for a further year as the increase will only apply from the subsequent renewal post November 2015; Introducing, or increasing, a claims excess within the policy can result in a overall premium reduction, thus offsetting the inflation and IPT increases expected. Most providers will allow an amount of excess of up to 500 which can really help to bring down spiraling PMI costs and; Most medical insurance is provided on a modular basis where costs can be controlled by reducing the overall outpatient cover limit, or adding in a six week NHS option. A review of the current basis of cover would be recommended to highlight any possible areas where improvements could be made. Our group risk team at Creative Employee Benefits are here to help you either review your current PMI offering or find the right cover for you and your employees at a cost that fits your budget. Please call Steve Richardson on or richardsons@creativeeb.co.uk to discuss your circumstances and we will work with you to ensure you can deliver this valuable cover to your employees. All information in this document is for general guidance only and does not constitute specific investment advice. Any regulated advisory services will be provided by suitably qualified advisers as part of the Creative group of companies. Creative Employee Benefits is a trading style of Creative Benefit Solutions Limited (company no ), which is authorised and regulated by the Financial Conduct Authority, reference number Creative Wealth Management is a trading style of Creative Benefit Wealth Management Limited (company no ), which is authorised and regulated by the Financial Conduct Authority, reference number Both companies are registered in England and Wales. Their registered office is 125 London Wall, London, EC2Y 5AL. London: 2 Cherry Orchard Road, Croydon, Surrey, CR0 6BA. Tel: Fax: Bristol: 1 Friary, Temple Quay, Bristol, BS1 6EA. Tel: Fax: Edinburgh: 152 Morrison Street, Edinburgh, EH3 8EB. Tel: Fax: Leeds: Princes Exchange, Leeds, LS1 4HY. Tel: Fax: Manchester: 53 Fountain Street, Manchester, M2 2AN. Tel: Fax: Online: info@creativeeb.co.uk