MONEY COMMENT
Get Financial Help From Your Employer

By Cliff D'Arcy
May 19, 2003

According to the Prudential (LSE: PRU), Britain's employers should be doing more to provide financial advice to their employees. In a press release today, the Pru proudly points out that it gives all staff one day off a year to attend to their personal finances.

We also look to our employers to help us avoid poverty in retirement, but many do little to prevent this. Research from the Pru reveals that nearly 80% of us believe that our employers have a responsibility to help us with our retirement planning. However, only a tenth of employees were actually given time off work to plan for retirement just before they stopped working. In fact, over a third of pensioners felt that their employers did very little to help them prepare for retirement.

What's more, under a quarter of employers offer access to financial planning workshops and courses. This is a crying shame because, having given us an income, it would be nice if our employers also helped us to make our money work as hard as we do.

The Pru is offering to extend its expertise in financial planning to medium and large companies, and expects to contact 2.5 million people this year through its worksite communications programme. So, should businesses help their employees to enrich themselves?

My wife's employer, one of the world's biggest businesses, does plenty to help its staff to get to grips with personal financial planning. As well as organising seminars to explain each year's Budget, her company introduces staff to independent financial advisers and organises seminars on buying shares in the company and choosing which company pension scheme to join. What's more, her company gives free money to its staff.

Firstly, it contributes to money-purchase company pensions, putting some cash in and matching extra employee contributions pound for pound. Secondly, it allows staff to buy shares in the company cheaply, which is also supported by tax relief from the Inland Revenue.

For example, my wife pays £125 a month into the "Share Reward" savings scheme, which costs her £75 after tax relief. This buys £250 worth of shares, as the scheme is a "buy one, get one free" deal. So, for a net saving of £900 a year, my wife receives £3,000 of shares. That's immediate growth of 233%, all other things being equal. After five years, my wife can withdraw the shares without any tax implications. So, her company and the taxman give her £2,100 a year tax-free – now that's what I call real financial support!

Also, by saving £250 a month into her "Sharesave" scheme for three years, my wife will amass £9,000, plus a tax-free cash bonus of £687.50. The total can be used to buy shares at a 20% discount to the market price when her plan began. This proves very lucrative if the company's share price rises strongly: one friend of mine ended up making over £40,000 tax-free in his five-year Sharesave with Tesco (LSE: TSCO) - luvverly!

So, if your employer offers help with pensions or share-buying (or even tailored financial advice), take it up on its offer. And if it doesn't, perhaps you could recommend it as a way of boosting staff retention, motivation and morale.

For more on retirement planning visit our Pensions centre.