At the recent Annual Share Plan Seminar, Gabbi Stopp of ifs ProShare raised an interesting point in relation to developments in the work place and how share plans will need to adapt in order to remain at the forefront of employee engagement strategies.
Having highlighted the fact that the ‘Generation Y’ demographic was increasing in size in the workplace, and that growth of ‘gig’ economy and diversity alongside changes brought about by factors such as global markets, innovation, technological changes will impact the workplaces of the future, she identified what she sees as the three key challenges for share plans in order to remain relevant in the employee engagement arena:
· Expectation of greater flexibility over the course of working lifetime
· Increased technological changes and advancements in the workplace
· Allowing for retirement
It’s this last point that particularly piqued our interest.
It is widely acknowledged that there will be a pensions gap and that for many in both the 16-25 and 45+ age demographics, saving on a regular basis does not seem to be either a priority or even a possibility due to a variety of reasons (e.g lack of funds available, lack of incentive…etc).
Whilst retirement provision may not be an obvious output of employee share ownership, its not too much of a stretch to suggest that there can be a link.
Employee share ownership takes many forms, but some of these can certainly be helpful in enabling employees to accrue value for their retirement:
1. Some schemes encourage regular saving out of earned income – Save as you earn and SIP Partnership shares for example;
2. Other arrangements allow employees to build wealth based on the growth of the company they work for – share options being a very popular example
3. Share plans in private companies often operate over illiquid shares. By nature, this makes the shares hard to sell until there is a corporate event so employees have no choice but to leave their wealth to grow in the company.
4. Employees of companies that are under the control of EOTs more likely to share in annual profits, enabling them to build up a nest egg of savings – and benefit from the tax exemption available on such bonuses;
5. Employee shareholders may get dividends from their company – investment income which they may be able to retain even after retirement in some cases.
And overriding this, where a business owner makes EO a part of the company ethos, that fact will often actively encourage a workforce to look to and plan for their future.
So, could we go do far as to suggest that employee share ownership could go some way towards closing the pension gap? We think so.
If you would like to discuss this further, as ever, we’re very approachable and happy to talk you through the possible options open to you and your Company.