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Survey of benefits in the financial services sector

BENEFITS

Survey of benefits in the financial services sector

With more and more companies focusing on total rewards, benefits provision has taken on a greater importance in recent years, so a new survey on the subject by consultants Mercer should be of particular interest to everyone.

The Mercer survey, examining 69 companies in financial services, a sector well known for being at the forefront of provision in this area, tells us that pensions and flexible benefits are the two areas that have seen the most change over the last 12 months.

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Now in its second year, the survey examined 15 types of benefit offered by financial sector organisations, with the vast majority of companies (79%) coming from the banking sector. Next most common were insurance organisations (16%), then building societies (4%), with the remainder from “other” financial sub-sectors.

Pensions changes greatest

  • Pensions, not surprisingly, was the benefit that had undergone the most changes over the last year, far exceeding any other type of benefit.
  • Pension provision was under pressure from a number of different factors, not least recent legislation in the area, while cost containment was another significant consideration affecting policy.　
  • Further complicating the pensions’ landscape, however, is the fact that the financial services sector has a considerable history of mergers and acquisitions with the desire by firms to standardise provision another driver of change.
  • Overall, the most common type of pension plans offered were defined contribution (DC) schemes with the number of defined benefits (DB) plans conspicuous by their absence.
  • A range of practice was found, with 36% of organisations operating a DC scheme only with no personal pensions, 34% had closed their DB scheme but used a DC plan with no personal pensions, while all other permutations were used by less than 10% of organisations.
  • Perhaps most notable of these were the companies operating either both types of scheme or those with DB schemes only. The percentage of respondents giving these answers was 6% and 4% respectively.

Flexible benefits

  • Of the areas of expected change for the future, flexible benefits topped the list. At present though, a total of 29% of financial services organisations said they operated such schemes. But Mercer reckons that we can expect to see “further rapid growth in the number of schemes in the years ahead”.
  • The most common approach to offering flexible benefits, followed by 44% of those with schemes, was via salary sacrifice.
  • Next most common was “full flex” with a flex allowance to “buy” chosen benefits, used by just over a quarter of those with schemes.
  • Of the remainder, 11% of those firms with flex allowed limited flexibility on a few benefits, 6% permitted voluntary benefits at the employee’s own expense, while the other companies with flex used alternative approaches not specified.

Other survey findings

Among the other findings of the survey are:

  • Typically, where firms offer the benefit, employees can flex 5% of annual base salary.
  • 85% of companies have legacy pension schemes and many are intending further changes to pension provision, including scheme closures and transfer of liabilities.
  • 40% of participants are planning changes following the recent age legislation, particularly reviewing age-related contribution scales and normal retirement ages.
  • Service-related sick pay is relatively common, with employees with one year’s service, for example, receiving seven weeks’ full pay and a further four weeks at half pay at the median. For those with five or more years’ service the periods were 26 and 12 weeks respectively.
  • The majority of companies offer private medical family cover at no extra cost to the employee.
  • Just under half of participants (43%) do not offer any form of car benefit, with 26% offering a choice of car or cash alternative and 28% allowing allowances only.
  • 29% of companies offer an HMRC-approved share purchase plan.
  • 49% of companies offer LTIPs and 33% provide executive share options, both typically to senior managers.
  • Current benefits packages were perceived to be more effective in retaining key talent than in attracting.

A final word

The survey states: “Improving the understanding and appreciation of the benefits package amongst employees was perceived by the majority of respondents to be the greatest challenge facing HR in terms of maximising the value of the reward package.” In fact: “Only 26% of respondents felt that their employees understood and appreciated the value of their benefit package as part of their total reward . . . the most effective means of communicating the value of benefits was deemed to be face-to-face briefing and company web sites.”

Want to know more?

Title: 2007 Survey of Benefits in the UK Financial Services Sector, Mercer.

Availability: The survey costs £500 but Mercer offers a range of other services, bespoke and otherwise. This includes data cuts of the survey at prices ranging between £750 and £1,500 depending on the number of benefits. A “relative value analysis” is priced at between £5,000 and £15,000, again depending on the number of benefits, while bespoke surveys are typically charged at between £15,000 and £20,000.

Details of all Mercer surveys can be found at http://uk.mercer.com or Mercer Human Resource Consulting, 1 Tower Place, London EC3R 5BU,  tel: 020 7626 6000.

Mercer offers HR and related financial advice, products and services worldwide. In its work with clients, it states that it “enhances the financial and retirement security, health, productivity and employment relationships of the global workforce”. Mercer has more than 15,700 employees serving clients in over 190 cities and 40 countries and territories worldwide. For more details visit http://uk.mercer.com.