Lager, AGA & Saga – a simple way to categorise your workforce into age groups for relevant financial wellbeing strategies? Possibly not.
The young guns in the ‘lager’ phase are now in touch with wealth coaches on Instagram and trading on their iPhones, whilst soon-to-be retirees in the ‘Saga’ stage have all under-funded their pensions and can only use a good old note pad. This is a story I read everywhere at present, and what a load of stereotypical rubbish it is.
I first came across the Lager, AGA & Saga categorisation of savers earlier this year and, I confess, I stole it and still reference it in my own financial workshops – primarily because it’s fun and memorable. However, it falls woefully short when applying any meaningful consideration and in-depth research into how to apply a financial wellbeing strategy. The young today are not drunkards that are only looking to make a quick buck trading on their iPhone, and older employees do not simply have deep set plans to take their note pad on a cheap cruise liner when retirement arrives.
It is, however, still tempting to follow the trend and suggest that you should lead with technology to access the younger members of your workforce, and follow more traditional methods for retirees. The reality, however, is that this approach is a little patronising and will likely be unsuccessful too.
Technology is key
Eden McCallum survey a large segment of the Wealth Management industry on an annual basis. Their 2020 report revealed that 70% of the industry feel that improving customer experience enabled by technology is the most important factor for growth in the next three years. Not forgetting that this comes from a segment of the industry that largely services individuals approaching retirement! Technology is now an important expectation across all age groups. Those with more experience are typically time poor and technology allows them to access financial education from multiple sources, and in bite-size chunks. If your financial wellbeing provider doesn’t have technology at the core of their offering…run, run away. This should include webinars, short video content for your employees and access to an intuitive benefits platform that can drive further engagement.
I’d also emphasise the need for video content, rather than workshops alone. Not only will this allow your employees to access support and educational content in their own time, but the varied length of educational content can help improve its impact. Over four billion videos are viewed on Facebook every day – the average watch time for these is 10 seconds. Of those that make it past this miniscule timeframe, the moment a video tips over the two-minute mark, engagement drops by more than 35%. Yet many wellbeing strategies consist of nothing more than lengthy presentations. Development of short, consumable content has been key to our offering at Lorica; it’s the only way to ensure maximum engagement across the workforce.
Now coming to our ‘age groups’ – let’s stay clear of ages and go for ‘getting started’, ‘accumulators’ and ‘pre-retirement’. Whilst, the FT would have us believe the youngest of these are trading Amazon shares on a daily basis, the Financial Conduct Authority’s Financial Lives Survey of 16,000 people suggests otherwise. Of everyone, 18–24-year-olds still rate themselves as the least confident and knowledgeable of all UK adults when it comes to managing money and financial matters, and 94% have no investments at all. Keep educational content simple, basic, and importantly, focused on taking action. The first step is the hardest, so some straightforward action points to get going are vital. However, don’t assume that the basics only need to be covered for younger employees: almost half of the UK workforce report having a low knowledge of financial matters and 60% of 55–64-year-olds have no investments at all. Hopefully it’s becoming clear why you can’t simply use age-based categories to approach your wellbeing strategy. Focus on knowledge levels and life events.
Many of your employees may have progressed into the ‘accumulation’ phase. However, it’s unlikely they will be accumulating enough, prioritising both the mortgage and new financial dependents instead. Their personal finances may fall by the wayside, with the significant majority of 35–50-year-olds not having any investments to speak of, and 82% of all UK adults having no insurance policies.
As such, it’s important that the dangers and tax inefficiencies of pumping all your excess income into your primary residence alone is highlighted to this group, alongside support with budgeting and a long-term pension strategy. Tax management across the family is also key, as many individuals in this phase fail to make use of the tax breaks the government provide.
Insurance should also be a feature – income protection, critical illness and family income benefit for families and couples in the accumulation phase is not only vital for those with financial dependants, but important for the employer too. Illness and unforeseen events will happen. Your support on these topics will separate you as an employer of choice and ensure that high quality employees are retained in the longer term, even if they hit short-term bumps in the road.
So that leaves the ‘pre-retirement’ group. The quite startling fact is that 55–64-year-olds in the UK have a mean investment pot of only £18,000. Even more concerning is that 50% of them incorrectly believe they won’t make it to 80. In fact, there’s almost a 35% chance they’ll live past 90 and the average life expectancy sits at 83. This highlights some fairly serious problems for both employee and employer, particularly when 32% of this age group have physical or mental health conditions that last longer than 12 months.
First, this age group is woefully underprepared, highlighting a need to run retirement sessions for younger individuals in your company. Employees need to look to retirement earlier to help get them ready. Second, you should have clear exit plans for your employees that are carefully managed with them in an open and transparent fashion. If this is done correctly, you will re-invigorate motivation for employees in their last few years, work towards a collective goal and help ensure they have the finances to retire when you need them to.
Make assumptions at your peril
Overall then, include technology, make assumptions about different age groups at your peril, and focus on retirement as early as possible. Financial wellbeing isn’t as clear-cut as separating your workforce by age group and putting on some presentations. It needs to be all-encompassing to be effective in helping your employees. Get this right and you’ll reduce your costs, increase productivity, and become an employer of choice; it’s certainly worth a bit of time and effort.
If you would like to find out more about how we can help you and your organisation, please contact Jordan Gillies at [email protected]