Download - HR & Hospitality Bites Issue 3 - April
April 2017 / Issue 3
Find out how she
explored the whole
of America
'I'M
FINE!'
Are your staff as ok
as they want you to
believe?
EMPLOYEE BENEFITS
SUCCESS
Pensions: The
Consultant's View
11 18
Once a month insights, features and interviews for
HR professionals in hospitality
03FREEDOM!
Employee
empowerment the
$2000 way
LIVE LONG AND
PROSPER
25
Why financial education
is the key to employee
engagement
Contents
03
11
18
26
Freedom! Employee empowerment the $2000 way
'I'm Fine!' Are your staff as ok as they want you to believe?
Employee Benefits Success Why financial education is the key to employee engagement
Live Long and Prosper! Steve Torbett explores the sobering reality of pensions and living longer
50 Broadway, St James, London, SW1H
020 7152 4107
www.damgoodpensions.com
ISSUE 3
16 Sandyford Place, Glasgow, G3 7NB
0141 222 2045
09
April
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03
08
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03 03
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Freedom! EMPLOYEE ENGAGEMENT
HR & HOSPITALITY
“ For many, the
£200,000 - £250,000
pension pot is a distant
dream; the level of
monthly savings
required to get to that
target is simply
unsustainable for
most. "
EMPLOYEE EMPOWERMENT
0
03
Our industry may be the least likely to offer scope for
freedom in making decisions to our frontline staff, partly
because of the nature of the beast; the way we operate
is run pretty much by systems and processes and also
because we don’t always think of customer facing teams
as being the decision makers.
Employee empowerment the $2000 way
The decisions are made by the people behind the desks aren’t they? Which, when you see it in
writing just feels a bit…wrong.
Think of a situation that we have all encountered whilst staying in a hotel, eating in a restaurant
or enjoying any aspect of our touch point with the hospitality industry. Then think
of that situation where something goes a bit wrong and the reaction to that. Is it “I’m terribly
sorry, let me speak to my manager” or is it “I’m terribly sorry, let me personally fix this for you
right now. Here’s what I’ll do”?
Hmmm – more likely to be the first, and how does that make you feel? Let me suggest. It
makes you feel like your complaint will receive an entirely un-bespoke solution – a service
recovery that has been created by a formula, designed by management, probably written
down somewhere in a book and kept in a drawer (definitely floating around a PowerPoint…)
and wheeled out in its unmodified state whenever needed.
It makes you feel like you’re a number, a ‘situation’, not really
a cash paying human being who has chosen this as an
experience. It makes you feel, well, a bit like this type of thing
might happen a bit more often than anyone would like it to
(which is why there’s a ready made solution...). So how would
you feel if the person serving you, checking you in/out,
whatever it is, listened to you and came up with a solution to
make everything better right there and then, on the spot,
without having to scuttle off into a hidden room through a
door in a wall before coming back to you with a middle of the
road, standard solution.
$2000 is an eye-
popping amount
of financial
freedom for any
employee to have
with the company
purse.
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You’d probably feel quite good. Like you’re being treated as an individual, that the person dealing
with your ‘situation’ cares enough to think through the experience from your point of view and
come up with a remedy as a response to that. You’d probably feel that the organisation behind
that is forward thinking and confident enough that it inspires its teams to think logically, creatively
and feel empowered enough within themselves to deliver that level of guest experience. An
organisation that chooses only the best people to work for them.
Thinking people. With switched on heads and
hearts. For decades the Ritz-Carlton Hotel Group
has given its employees a $2000 discretion to make
it right or delight. That’s $2000 per situation, not
per annum. $2000 is an eye-popping amount of
financial freedom for any employee to have with
the company purse.
But I suppose, it’s all about how you define cost. Cost of keeping a (hopefully loyal) customer/future
ambassador vs cost of losing a customer. $2000 doesn’t seem like such an expensive mend. The
average Ritz-Carlton customer spends around $250,000 with the group in their lifetime. And in any
case, it’s not ‘all about the money’.
Apparently, the full $2000 has never been needed. It’s not about the money being used to fix a
situation, it’s about the empowerment of the employee and the removal of any restrictions in the way
they help, care for and treat a customer, eliminating the feeling of the hand tied behind their back. It’s
about putting a relationship approach before a transactional one and allowing staff to use their intuition
to exceed the expectations of a customer. It's not necessarily used as a fix either. Employees have the
freedom to use their hearts and minds to make an amazing experience truly exceptional.
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EMPLOYEE EMPOWERMENT
Staff replaced a little boy's
lost Thomas the Tank
Engine when they
learned that his favourite
toy had gone missing as
the guests were
departing. They snapped
Thomas in a variety of
locations around the
resort, sent the child a
photograph album of
Thomas' 'holiday'
adventures and the
replacement toy.
A lost Joshie enjoyed an
'extended vacation' before
being reunited with his
owner, along with an
album of Joshie's holiday
memories.
FINANCIAL EDUCATION
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3
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1. Social media at work
No more staring at a blank Outlook message
wondering how you can phrase ‘Can you please
just send me the info right now?’ in a slightly less
demanding way and proceeding to rattle off the
usual email niceties… We’re talking speed,
brevity and no more ‘Hope you had a lovely
weekend’… Quick and easy exchanges, saving
time, cutting down in email overload. Why
wouldn't you?
2. Social media at work
2. In an Instant
The way to reduce the risk and fear element is in how
you empower your employees. It’s not a case of
delivering a carte blanche, it’s about having a
framework to give your employees confidence in the
boundaries of their freedom to make decisions,
providing a set of clear guidelines. It’s about giving
your teams autonomy as individuals to make your
brand look good.
The people who are in the best position to know your
customer needs are the ones in front of them, but if
they’re following a set of rules and processes rather
than guidelines, part of their intuition, personality,
will to exceed expectations and truly surprise and
delight will be switched off.
It’ll be stifled, numbed and partly dormant, which
results in bland, standard, impersonal service. The
stuff that sets you apart from your competitors – and
not in a good way…
EMPLOYEE EMPOWERMENT
So why are we not all doing it then, when we know that the impersonal ‘I’ll get my manager’
approach is such a huge turn off? Fear of lots of things. Bad decisions, creating unrealistic customer
expectations, setting a precedent, throwing big money at small problems and opening the
floodgates, to name a few.
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2. In an Instant
4. Spread the love
We only have to look to how brands engage with customers via social media to see how much the
style of customer service has shifted over the past couple of years. Standard responses have become
unpopular in an age where customers expect personality driven responses, something that’s a
genuine response to their tweet/complaint/questions/letters. It's also an opportunity for brands to
express their personality and win a bigger (and more permanent) place in the customer's heart.
Standardisation is out.
Being real is in, and yes, of course
systems and processes are the
bones that piece an authentic,
quality experience together but
it’s personalisation and
personality that bring it to life and
make it fly higher than the
customer expected it to.
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2. In an Instant
4. Spread the love
So how can you empower your teams to ‘be them’, work with freedom, enjoy their jobs
more (because providing amazing service feels good) and connect on a deeper level
with the customer (without it costing you $2000)?
1. Empowerment guidelines
Virgin Airlines allows employees to work within a ‘judgment playing field’, whereby
senior management specifically defines where employees are and aren’t allowed to
deviate from established rules and processes – and then gives them the flexibility to
experiment with new ways for serving customers.
2. Communication of your mission, vision and values
If your people understand why, they’ll feel more comfortable with finding a ‘how’.
Understanding the ‘big idea’ is crucial for employee engagement and empowerment.
It gives them something to work towards, something to get excited about, something
to be inspired by – a common goal.
3. Support
Have a safety net, a sounding board – something which makes your teams feel more
comfortable in making that decision. Ensure that every employee has the right training,
resources, back up and support they need to do their jobs and feel empowered and
confident to make the best choices in every situation.
4. Trust
Trust inspires trust. The more you trust, the better the relationship you have with your
teams and the better service they'll deliver. Take a step back, give some space and
freedom and let your people shine.
5. Leadership
Inspiration, especially for new staff has to come from the already inspired. People feel
more comfortable and confident when they see a set of values being lives and
breathed by the folk running the show. Otherwise it's just words, on paper.
Empowering your teams through ‘freedom’
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4. Spread the love
7. Praising the good decisions
Empowerment is all about confidence boosting and there is no greater boost than
knowing you’ve made the right decision. Recognise and reward.
6. Hire the right people
Richard Branson explained that once you hire the right people and give them the best
training, let them use their imagination and creativity to solve problems. “Rather than
providing rules or scripts, you should ask them to treat the customer as they themselves
would like to be treated – which is surely the highest standard,”.
8. Communication
Creating an open, honest, ideas culture where employees feel comfortable in coming
forward with questions, feeding back where things didn’t go quite right and of course
expressing new ideas and solutions, giving their experience of where it’s worked an
where it hasn’t.
9. Have their backs
Knowing that senior management will cushion any decision mishaps and protect staff
is key to empowerment and confidence building. Nobody’s going to stick their neck
out unless they have the support and backing of their manager.
10. Review your policies
Do your policies feel like they might help or hinder employee empowerment? If
employee empowerment is your goal, the way you express that in your policies is key
to making this live and breathe in your organisation.
Great things can happen when employees are given more power in the decisions which they are
faced with every day of their working lives. A greater sense of ownership, pride in their work,
improved performance and a more ‘real’ sense of service. And of course, the likelihood that you're
going to be able to give your customers something that they can't get anywhere else.
The reasons ‘to do’ outweigh and outnumber the reasons and risks not to. In an age where love is
worth more than money, where relationships are everything, and knowing that you can’t legislate for
every situation in life, it seems like a pretty good time to give more power to those who truly make a
difference to your organisation, brand and customers – your people.
Y O U C A N ' TC H A N G E T H E
W I N D . B U T Y O U
C A NA D J U S T Y O U R
S A I L ST O
R E A C HY O U R
D E S T I N A T I O N
P A U L O C O E L H O
10
EMPLOYEE ENGAGEMENT
HR & HOSPITALITY
“ For many, the
£200,000 - £250,000
pension pot is a distant
dream; the level of
monthly savings
required to get to that
target is simply
unsustainable for
most. "
FINANCIAL EDUCATION
0
11
“How are you?”. “I’m fine!”. How many of us offer that response when we’re asked
that question? Probably abut 95% with the other 5%
being so honest in their answer that they have the ‘asker’
recoil immediately and walk backwards at speed… Which is what we don’t want, so we tell a white lie. We say that everything’s ok. When it’s not.
In any case, everything that goes on in our world is too ‘big’ to encapsulate in any sort of
response to that question, so there’s never any point in asking it.
It’s a useless nicety. A formality. An opener.
You can probably split our lives into five areas; ‘us’ as a person, family, job, health, finances. If
you ask a member of your staff, “How’s your family?”, you’ll probably get a reasonably full and
frank response. If you ask someone ‘How’s your health?”, same; people will also tend to be
honest as far as is comfortable for them to do so.
If you ask someone ‘How are your finances?’, you’ll probably be looking at someone who is
awkward eyeballing the floor, asking it to swallow them. It’s too difficult to ask, to
uncomfortable to respond to, so it’s better just to sweep under the carpet really isn’t it. Or is it?
FINANCIAL EDUCATION
Recent research by Wealth Wizards revealed that a third
(31%) of respondents believe their employer takes a greater
interest in their physical health than their financial health. Its
survey of 2,000 individuals also found that 70% of
respondents feel that their physical and emotional wellbeing
is negatively impacted when they are in poor financial
health.
58% of
respondents
believe their
financial health is
just as important as
their physical
health, and a
further 10% believe
their financial
health is more
important than
their physical
health.
PAGE 10 HR & HOSPITALITY
EMPLOYEE EMPOWERMENT
12
The research also found:
• 62% of respondents are worried about not having enough
money when they retire.
• 36% of respondents think their current financial situation
causes them more stress than their physical health, and 34%
believe this will continue into retirement.
• 58% of respondents believe their financial health is just as
important as their physical health, and a further 10% believe
their financial health is more important than their physical
health.
As employers, we’re pretty ‘up’ on how to support the physical wellbeing of our staff but could we
be doing more to protect our staff from financial stress, given that it has a significant impact on
their emotional wellbeing?
FINANCIAL EDUCATION
Giving your employees access to financial advice is just as important as giving them access to the
other benefits you provide. Not just for their benefit, it's for yours also.
More than a third of employees are distracted at work by financial concerns, according to research
by MetLife UK. Its UK Employee benefits trends study 2017, which surveyed 301 employees and
600 HR representatives and decision makers in the UK, also found that more than half (54%) of
employee respondents aged 18-30 years old are distracted by financial worries at work.
The link between financial stress and productivity is clear. It’s entirely likely that just over half of
your workforce are not giving you their best because of the financial stresses they carry every day
of their lives.
So, financial education is not just a ‘nice thing to offer’, it’s a ‘do it or it’ll cost you’ in terms of the
service your deliver to your customers and ultimately, how productive and profitable your
organisation is.
Employees who are able to give you their full focus are always going to be able to contribute more
than anxious, distracted employees, therefore it’s in your interests to help them tackle these areas
of potential stress to enable them to go about their jobs in a ‘lighter’, more engaged way.
EMPLOYEE EMPOWERMENT
CHANGING WORKFORCE
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FINANCIAL EDUCATION
FINANCIAL EDUCATION
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1. Social media at work
No more staring at a blank Outlook message
wondering how you can phrase ‘Can you please
just send me the info right now?’ in a slightly less
demanding way and proceeding to rattle off the
usual email niceties… We’re talking speed,
brevity and no more ‘Hope you had a lovely
weekend’… Quick and easy exchanges, saving
time, cutting down in email overload. Why
wouldn't you?
2. Social media at work
2. In an Instant
FINANCIAL EDUCATION
The research also found:
• More than half (53%) of employee respondents are interested in receiving financial
counselling.
• 42% of employee respondents are concerned about credit card debt.
• 57% of employee respondents are worried about the financial security of their family
if the main wage earner is unable to work as a result of a disability or serious illness.
• 57% of employee respondents are concerned about the financial security of their
family in the event of their premature death.
• 41% of employee respondents are worried about the affordability of their children’s
education.
• More than a third (39%) of employee respondents report that they are living from
payday to payday.
• 35% of employer respondents offer workplace wellness schemes.
• 87% of employee respondents agree that wellness programmes have a positive
impact on their health.
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2. In an Instant
4. Spread the love
Financial education in the workplace – what’s the right approach?
1. Sensitivity
The younger generation might be more open to discussing their financial issues with
you but the older generations may not be. Finances, along with mental health
remain the two biggest taboos in the workplace so the way you approach it is critical
to achieving a successful outcome. Creating a culture of openness and
confidentiality is the first step to inspiring trust within your employees and ‘making it
ok’ for them to have these conversations with you. Nudge Global’s research found
that confidentiality is key in the provision of a financial education support
mechanism for 77% of employers.
2. Open conversations
Discussing options rather than a ‘you need to do this to fix it’ is the way forward. And
there will always be a range of options. Every problem has a solution and as an
employer, the solutions you take the time to research and present will hold more
weight to your employee than perhaps them going to an external provider.
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2. In an Instant
4. Spread the love
3. A holistic approach
There is nobody better placed to create an individual plan to support your employees’
financial wellbeing than you. You are the primary source of income, you offer a range
of benefits and can tap into the financial knowledge of your employee benefits
provider (in this case, that’ll be us!) so you’re in the unique position of being able to
build a solution for them, bringing together different elements of your employee
benefits programme such as workplace loan, pension advice, debt counseling,
childcare vouchers, retail and other discounts.
4. Being honest with your agenda
If you’re going to make your financial education programme work, you have to be
very clear about why you want to do that. You’re most likely going to be
recommending external providers, who somewhere down the line will make money,
which your employees will no doubt be aware, so your programme has to be
absolutely transparent to avoid a situation where employees feel they are being
opened up as a potential ‘market’ to a third party provider. Nobody wants to feel
vulnerable or indeed that they’re being ‘sold to’.
Financial education programmes
need a strategy and a reason, both of
which should be clearly
communicated.
The benefits of a financial education
programme are clear, but do you
really need one?
If you’re ticking more than just a few
boxes over the page, it’s likely that
there is an opportunity for you to
address a number of issues by
offering financial education as part
of your range of employee benefits.
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4. Spread the love
And of course, having a financial education
programme shows you care, are interested
in the emotional and financial wellbeing of
your staff and will support them over a
period of time to deal with their financial
issues. That in turn inspires loyalty, a closer
bond with your employees and gives you a
‘better’ employee.
Remember, this is the stuff that keeps
people awake at night and has the biggest
impact on anyone’s ability to give the world
the best ‘them’ the following day.
Part 2 of our Financial Education
series looks at how to shape and build
your financial education programme.
Your organisation is going through, or has gone through the auto-enrolment
process
You offer a defined-contribution benefit plan with a range of options.
You offer a share save or share incentive plan
There is a low take-up of your benefit options
Your staff focus more on salary rather than the full package of benefits you offer
You have poor engagement generally within your teams
Absentee-ism (especially stress related) is high
Does your organisation need a financial education programme?
EMPLOYEE ENGAGEMENT
HR & HOSPITALITY FINANCIAL EDUCATION
0
18
In the last issue we explored the relationship between
financial stress and ‘us’ as employees (and employers)
and looked at the benefits of a financial education
programme in the workplace.
As employers, we’ve known for many years how to support the physical wellbeing of our
teams, but it’s only within the last five years or so that the wellbeing focus has acknowledged
the significance that financial stress has on a person’s wellbeing, in and out of the workplace.
It’s not something that switches off. Financial stress is there all the time.
The UK Employee Benefits Trends Study 2017 by MetLife UK, which surveyed 301 employees
and 600 HR representatives and decision makers in the UK found that more than half (53%) of
employee respondents were interested in receiving financial counselling and more than a third
(39%) of employee respondents report that they are living from payday to payday.
Financial stress plays a huge part in productivity as it’s one of the biggest influencers in a
person’s emotional wellbeing and one of the key factors why that person’s not able to give you
the very best version of ‘them’ every day.
Financial education in the workplace, while it may seem like a
‘nice to offer’, it’s actually a great deal more than that. If you
choose not to do it, it may well cost you in terms of the
service your teams provide, how engaged they are and
ultimately, how productive and profitable you are as an
organisation.
Financial education benefits you both.
Understanding the
value of the
benefits
programme you
provide is what
engages your
employees and
empowers them to
get the most value
from what you offer
them.
PAGE 10 HR & HOSPITALITY
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It’s also key to engaging your staff in your employee benefits
programme. Improving the financial awareness of your
employees enables them to make more informed decisions
about what benefits are right for them, and helps them to
build a package of benefits which really do work for them,
their lifestyle and their families, which ‘ups’ the value you
deliver to them as an employer and creates loyalty, increased
engagement, motivation and that all important word –
retention.
Understanding the value of the benefits programme you
provide is what engages your employees and empowers
them to get the most value from what you offer them and by
providing the education behind this, you not only create that
opportunity for understanding, you let them know that you
really do care about their wellbeing and that they’re valued.
FINANCIAL EDUCATION
We looked at some of the indicators which may make you want to consider whether you do need to
build a financial education programme in the last issue - these will help you to define your
objectives of the programme and shape your goals.: EMPLOYEE EMPOWERMENT
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FINANCIAL EDUCATION
• Your organisation is, or has gone through the auto-enrolment process
• You offer a defined-contribution benefit plan with a range of contribution and investment
options • You offer a share save or share incentive plan
• There is a low take-up of your benefit options
• Your staff focus more on salary rather than the full package of benefits you offer
• You have poor engagement generally with your teams
• Absentee-ism (especially stress related) is high
Source: Barclays Financial Well-being Infographic
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1. Social media at work
2. Social media at work
2. In an Instant
FINANCIAL EDUCATION
1. What are we doing this for again?
Building your financial education programme
Objectives - defining exactly what it is you want to achieve is
crucial, otherwise it all becomes ‘a nice thing to do because it’s a
nice thing to do’.
Why does your organisation need a financial education
programme? What needs do you want to address? Reducing
absenteeism or ‘presentee-ism’ related stress? Improving
understanding of the benefits you offer to increase engagement?
Providing your employees with tools to develop better money
management skills?
The only way to build a solid programme (which you can
evaluate) is to establish clear goals and objectives at the outset.
2. What does success look like?
Evaluation - when you’ve set your objectives, you should start
to build your evaluation process and gather your baseline data
which you will measure against once your financial education
programme launches.
Regular monitoring and evaluation is essential to build a
picture of what’s working, what’s not, what can be tweaked
and to establish whether or not you require any more resources
to run the programme.
3. Money, money, money!
Budget - you know what you want to do, but the way you’re
going to do it will be influenced mainly by one thing – how
much you’re able to invest in your programme. It doesn’t need
to cost the earth and it could be a case of reallocating some of
your employee benefits communications programme budget.
It’s also important at this stage to establish your internal
resource and the logistics of rolling out the programme – do
you need additional expertise, external suppliers or do you
have the capability and resource internally?
So where to start? You’ve established the need for a financial education programme, what next?
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1. Social media at work
2. Social media at work
2. In an Instant
FINANCIAL EDUCATION
4. All kinds of people
Building your financial education programme
Audience segmentation - your people are different ages, at
different stages in life and have different needs and wants. In fact,
by 2020 we will have the first ever four generation workforce.
Something huge to consider. One size never fits all and what
floats one person’s boat is an immediate turn off to another.
Segmenting your staff and establishing the different needs of
these segments is key to being able to develop clear messaging
that resonates within each of these groups and ultimately, for the
success of your programme.
6. The people who can make it fly or die…
Stakeholders - who do you need ‘buy in’ from internally to
make your programme ‘fly’ (and not die!)?
It’s important to bring your key stakeholders in as early as
possible and take them on the planning journey with you,
perhaps not all of them (you will most definitely not ever want
to do that…), but maybe you’ll have representation from senior
management in the project team and develop a mechanism for
feeding back progress and updates.
5. Calling in the experts
Consultants - if you use an external supplier, it’s important that
your teams become familiar with who that is, who they are and
what they do. People buy people after all and
your programme will have a much bigger impact if your teams
have developed trust in your supplier.
Many organisations say that the success of their financial
education and benefits programmes are down to the dedication
and enthusiasm of their external consultants and also the fact that
the messages communicated are seen to be more credible as
these people are independent.
Sometimes you can do it all yourself, sometimes it really does pay
to get the experts in.
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1. Social media at work
2. Social media at work
2. In an Instant
FINANCIAL EDUCATION
7. It’s not just what you say, it's how you say it
Building your financial education programme
Communication - how are you going to communicate the
different messages of the programme to your segmented internal
audiences? What methods are you going to use? What tools do
you have and what tools do you need?
Don’t be afraid to do some testing at this stage to make sure
you’re using the right communication tactics to target the right
people within your organisation. Talk to them, do some quick
surveys, find out what mediums are going to be most effective to
really make your programme fly!
9. The hook
Launch - what is going to be happening within the next year in
your organisation that you can ‘hook’ the launch of a financial
education programme to. It will launch far more effectively if it
has something to hang on, so look at what sort of financial
events or announcements are on the horizon within your
organisation that you can use as a platform to roll out your
programme.
8. What did you say again?
The messages - defining the messages you want to communicate,
be understood and prompt action is a hugely important part of
the planning process. The more meaning a message has to an
individual, the more likely they are to change their behaviour, so
this means looking at everything you’ve done so far –
understanding your staff needs, who they are and how they like
to communicate (and be communicated to), being clear about
your objectives and then building strong messages that will mean
something to each of your audience segments.
10. Roll it out
Delivery - plan your launch date and work your way backwards to build your timeline of
communication. This is the period when it’s going to be massively important to bring these key
stakeholders in to ‘champion’ your programme and start sowing the seeds. Be prepared for curiosity
and questions and make sure you and your team have the answers for them. This is the stage where
you can start to get buy in from your teams so building trust and confidence is crucial.
FINANCIAL EDUCATION
CHANGING WORKFORCE
3
3
4. Spread the love
DAM has supported a number of
organisations in the hospitality industry
to build and launch financial education
programmes and we’re delighted to
have been invited to share our
expertise as part of this year’s Caterer
HR Forum on 24 April.
The Forum will educate and inspire
people leaders working within the
hospitality sector – it’s a must attend
event for any HR professional working
in a restaurant, hotel or contract
catering business.
We hope to see you there!
The DAM Team
Humans living longer – shock!
It is just over a hundred years since the UK
introduced the first basic state pension. Just like
today, you got it at 65 but this is where the similarity
ended.
Back then, only men were eligible and anyone who
was deemed of “poor character” or had been
convicted of drunkenness was excluded. Jeepers!
Single men got 5 shillings a week (5 pence) and
married men got 7 shillings and sixpence (7 and a
half pence).
EMPLOYEE ENGAGEMENT
We can all
benefit from
greater flexibility
in pensions but
at what cost?
Steve Torbett
from DAM
explores the
sobering reality
of living longer...
THE CONSULTANT'S VIEW
25
A woman getting to 65
can expect to live even
longer. And the experts
tell us that this
improvement in our life
expectancy will get better
still. A baby girl born in
2017 has an evens
chance of living to 100.
There is also a growing
expectation that the age
at which we get our state
pension will drift out
further, especially for
workers currently under
45. If you were born
before 6th December
1953, you will still get your
state pension on your
65th birthday.
If you were born after that
date, your pension age
will be older. This change
has been in place for
some time but the
government is expected
to review this for younger
people, pushing their
retirement age out to 69,
70 or even older.
Sobering news. The
consequence of this huge
improvement in life
expectancy is that our
pension pots will need to
last a lot longer. But this
need to make our funds
stretch further comes at
The new maximum basic
pension from April 2017 is
£159.55 although how
many will get this amount
is not clear. The full
amount will only be given
to workers who complete
35 years of National
Insurance contributions.
Thankfully the character
test has gone but the
government is
considering other
changes that will reduce
how much we get or when
we get it.
Today the state pension
increases each year by
either inflation, average
wage increases or 2.5% -
whichever is the higher. It
looks increasingly unlikely
that this 'triple lock' will be
watered down or removed
altogether.
Perhaps the biggest
difference though is how
long the first state
pensions were paid for.
In 1909, a man reaching
65 only had a 50% chance
of reaching 66. The world
has of course moved on.
Men and women currently
have the same entitlement
which starts at 65.
The experts tell us
that this
improvement in
our life expectancy
will get better still.
A baby girl born in
2017 has an evens
chance of living to
100.
PAGE 10THE CONSULTANT'S VIEW
the same time as private
pensions becoming more
flexible.
Since April 2015, anyone
over 55 has been able to
dip into their pension fund
whenever they want.
Before that date, the over
55s could take their lump
sum but if they did so,
they had to take an
income as well. George
Osborne surprised
everyone by removing
that rule.
At the time, commentators
suggested that people
would cash in their pots to
buy Lamborghinis but the
reality has been more
mundane. 26
to have this option within
their existing scheme. This
has led to many people
transferring out of their
existing arrangements but
this route is fraught with
problems. Anyone
considering this must
seek financial advice and
that advice is often to stay
put.
Another reason to think
twice is that the amount
you can save into a
pension drastically
reduces once you have
taken your lump sum.
From April 2017, the
amount you can pay in
each year reduces from
£10,000 to £4,000. If your
usual contributions are
below this, then you might
decide this is not a factor.
However, many people
have income that is not
guaranteed and can
fluctuate from year to year.
If you have taken your
lump sum and then have a
very good bonus or
trading year, you might
regret limiting your ability
to save into your pension.
For others, the obvious
difficulty is that dipping
into their pension now
means less funds
So, for most working folk,
the best answer is usually
to leave your fund as long
as possible. While your
money is invested in the
pension, it grows virtually
tax free. So, the longer you
leave it, the faster it should
grow. In most cases, this
means looking at other
solutions.
Can you access other
investments instead?
A recent survey of those
who have dipped into
their pension pots
concluded that most
people have used their
lump sums to pay off
mortgages and other
debt, make home
improvements or go on
holiday. Over half of the
lump sums encashed
were for less than £10,000
(source: ABI report,
August 2016). However,
after the initial rush of over
50s cashing in their funds,
the volume of people
using this option slowed
significantly through
2016.
Not every pension fund
allows you to access your
cash in this way. Anyone
with a pension based on
their final salary is unlikely
PAGE 10THE CONSULTANT'S VIEW
Steve Torbett
Consultant
available for their old age.
If you (or your partner)
have substantial pensions
or savings elsewhere then
this might not be so
important. However, if you
do have other savings,
you should consider using
them first instead of your
pension.
The obvious conclusion is
that we can all benefit
from greater flexibility in
pensions but we need to
make clear and conscious
decisions about how we
will fund our lifestyles in
old age. Whatever you
decide to do, it will help to
have a plan about what
retirement will mean for
you and (of course) to
build your pensions and
investment pots as early
as possible.
As Mr Spock used to say,
live long and prosper!
27
P E O P L E A R E A L W A Y SB L A M I N G T H E I R
C I R C U M S T A N C E S F O RW H A T T H E Y A R E . ID O N ’ T B E L I E V E I N
C I R C U M S T A N C E S . T H EP E O P L E W H O G E T O N I N
T H I S W O R L D A R E T H EP E O P L E W H O G E T U P
A N D L O O K F O R T H EC I R C U M S T A N C E S T H E Y
W A N T , A N D , I F T H E YC A N ’ T F I N D T H E M , M A K E
T H E M
G E O R G E B E R N A R D S H A W
08
Produced by Davidson Asset Management
Editor: Mhairi Clarke
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