The regulator has sought to clarify key rules in a bid to encourage more companies to set up workplace savings schemes, alongside their main pension provision.
The Financial Conduct Authority said that perceived regulatory barriers may have hindered employers and savings providers from offering these schemes.
It points out that only 7 per cent of UK employers currently offer a workplace savings schemes, despite evidence from Nest Insight that that can play an important role in improving employees’ financial resilience. The FCA’s most recent Financial Lives Survey found that one in 10 people have no cash savings, while one in five have less than £1,000 they could draw on in an emergency.
It adds improving financial resilience among the general population could also support economic growth.
The statement seeks to address a a number of regulatory concerns around workplace savings schemes, including questions around financial promotions and whether this is a regulated activity for which employers need FCA authorisation.
The FCA says that communications from employers to educate or give employees information will not be deemed as promotion, provided there is no element of persuasion or incetiment.
It also adds that workplace savings schemes can be can be structured in a way that does not involve the employer carrying out a regulated activity, particularly where the funds are transferred to the savings provider rather than being retained by the employer.
However it adds that each workplace savings scheme will be different. Employer should consider whether their particular model involves undertaking activities that could be regulated under FSMA or other financial services legislation.
The statement also addresses issues around National Minimum Wage regulations, and whether making a deposit to a savings account could be seen as a deduction from wages, taking employees below this minimum.
It says there are a number of considerations to bear in mind and employers should ensure funds in these savings account are held in the employee’s name, and there is no change for accessing or transferring money.
The statement also covers whether a savings provider should carry out customer due diligence checks in line with Money Laundering regulations and what they need to consider to ensure they remain in line with data sharing codes of practices in terms of employees’ personal information.
It also adds information for savings providers on complying with Consumer Duty and FSCS requirements.
The FCA says: “We have prioritised efforts to support the adoption of workplace savings schemes through our workplan under our new strategy and our strategic objective of helping consumers navigate their financial lives.
“Unlocking the full potential of workplace savings requires a joint effort. Over the past year we have worked with the Department of Business and Trade (DBT), His Majesty’s Treasury (the Treasury), the Information Commissioner’s Office (ICO), the Prudential Regulation Authority (PRA) and Nest Insight, as well as employers and savings providers.”
This statement was welcomed by the industry. Broadstone senior consultant Richard Sweetman says: “The UK suffers from significantly low levels of savings with millions of people holding little or no cash reserves to protect against financial shocks and provide longer-term financial security.
“Workplace savings schemes can play a vital role, complementing auto-enrolled pension programmes, to help employees improve their financial wellbeing.
“The FCA’s clarity around these schemes and ongoing collaboration with industry stakeholders to promote workplace savings is an important step. We hope to see more employers explore workplace savings plans to encourage regular saving from their employees.
“This can ultimately help reduce money worries by building financial resilience, leading to happier, more engaged and more productive employees in the workplace.”
Pete Glancy, head of policy at Scottish Widows adds: “Workplace pensions have revolutionised how we save for retirement and there’s no reason that the same can’t be done for the nation’s shorter-term savings goals. The positive ripple effect could be far reaching. We know that building financial resilience, through emergency savings pots or cash-savings buffers, can unlock people’s confidence when it comes to longer-term financial goals, like retirement, and support the 15.3 million people who are at-risk of poverty in later life.
“Uptake of these workplace savings schemes has, so far, been poor. The government’s intervention is positive but they may need to go further than clarification, and consider an auto-enrolment style initiative to boost participation.
