Statement on workplace savings schemes

Considerations here include:

• Employers must ensure a worker receives at least national minimum wage pay for each reference period.
• Any deduction or payment for the employer’s own use and benefit or expenses connected to the employment would normally reduce pay for NMW purposes.

Employers should therefore seek to avoid the below risks when putting in place workplace savings schemes:

• The funds allocated to workplace savings accounts are held by the employer or the workplace savings account is not in the employee’s name.
• Schemes where employees incur charges when accessing funds – either withdrawing them or transferring them to a current account.
• Delays when employees access their funds which could mean the employee falls below the minimum wage for that reference period. 

Further guidance on calculating the minimum wage is available here[3]. Please note, these are general points and do not relate to specific workplace saving schemes.

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. Our view is that workplace savings schemes 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, making arrangements for employees to open savings accounts may involve making a financial promotion (see section 3.3. below).

Our Perimeter Guidance Manual[5] (PERG) contains relevant guidance in PERG 8.4 about the meaning of 'invitations' and 'inducements'. It also contains specific guidance about employers’ communications with employees at PERG 8.4.34G. This includes confirmation that communications to educate or give employees information, with no element of persuasion or incitement, will not be invitations or inducements under Section 21. However, if the employer presents information about a workplace savings scheme in a way which promotes the scheme (encouraging employees to join it), it could constitute a financial promotion. In these cases, to comply with the restriction in Section 21, the communication would need to:

1. Be issued by a person authorised under FSMA (which would likely be the savings provider or, if it is authorised, the employer) to the employees, or
2. Be approved by a person authorised under FSMA who has any required permission to approve (which would likely be the savings provider).
3. Come within an exemption from the restriction (such as that relating to deposits in Article 22[6] of the Financial Promotions Order).

Savings providers will need to consider how they reach an agreement with the employee to open an account with them, and how the employer, payroll provider, or employee benefits company may be involved in that process.

Relevant requirements in BCOBS apply to workplace savings accounts, like any other savings account. 

For example:

1. As per BCOBS 3.1.6R[7], where their agreement with the employee is a distance contract, savings providers are required to provide account terms and conditions and specified information in a durable medium in good time before the employee is bound by the contract. This can be provided by someone else on the savings provider’s behalf (BCOBS 3.1.7G[7]), so for workplace savings this could be the employer, payroll provider, or employee benefits company.
2. Savings providers should be aware of BCOBS 3.1.8R[8] where their agreement with the employee is a distance contract: ‘The performance of the distance contract may only begin after the consumer has given his approval’. 

The FCA encourages savings providers to engage with employers to consider how to best meet these requirements without introducing unnecessary barriers that might discourage employees from saving.

For example, by including the documents needed for the employee to open an account with the savings provider in the onboarding process for new joiners or when joining an employee benefit platform.

This set of requirements is referred to as ‘Customer Due Diligence’ or ‘Know Your Customer’. 

The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017, specifically Regulation 28[7], requires savings providers to identify the customer, verify the customer's identity and assess, and where appropriate get information on, the purpose and intended nature of the business relationship. The Joint Money Laundering Steering Group Guidance[8] and Financial Crime Guidance (3.1)[9] gives more guidance. The latter includes examples of good and poor practice and sets out our expectations.

A savings provider can, based on its own risk assessment, apply simplified CDD measures if it decides the business relationship or transaction has a low risk of money laundering and terrorist financing.  Part 3 Chapter 3 of The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (n. 37) includes a partial list of factors, which may indicate a lower risk. 

To minimise frictions for all parties, including employees, savings providers can receive information needed to carry out CDD from employers, their payroll providers, or employee benefits companies. This is because employers and payroll providers or employee benefits companies are likely to have already got this information as part of their own pre-employment checks. 

The Information Commissioner’s Office’s (ICO) Data Sharing Code of Practice[10] sets out how data protection legal frameworks enable responsible data sharing. 

To share the employee’s personal data with the savings provider, under the UK General Data Protection Regulation (GDPR), the employer, payroll provider or employee benefits company would need to establish a lawful basis. As noted in ICO guidance[11], which lawful basis is most appropriate for a data controller to use will depend on the purpose for processing and the relationship with the individual. Employers, payroll providers or employee benefits companies must decide how to approach this based on their circumstances. Relevant lawful bases could include:

• Contract: where there is a need to process someone’s personal data to deliver a contractual service to them or because they have asked for something to be done before entering into a contract.  
• Consent: where people are given a genuine ongoing choice and control over how their data is used (see ICO’s specific guidance on consent here[12]).
• Legitimate interest: where people’s data is going to be used in ways they would reasonably expect and which have a minimal privacy impact, or where there is a compelling justification for the processing. Further information can be found here[13]. 

In addition to ICO guidance, employers, payroll providers and employee benefits companies can also use the ICO lawful basis interactive guidance tool[14] to help decide the most appropriate lawful basis for processing personal data.

If a savings provider fails, the FSCS[15] may automatically compensate consumers subject to relevant rules on eligibility and limits.

The rules on FSCS disclosure obligations are in Chapter 16[16] of the Depositor Protection Part of the Prudential Regulation Authority (PRA) Rulebook. These rules require deposit takers (banks, building societies or credit unions) to give depositors specific information. They include a requirement for savings providers to receive an acknowledgement of receipt of an ‘information sheet’ from potential depositors before they enter into a contract on deposit-taking.

Accordingly, employees, when entering into a contract with the savings provider, would need to confirm that they have been given an information sheet about the protection of deposits. The PRA expects savings providers to request acknowledgement of these materials and would have to explain how they meet these rules if asked. 

Savings providers should consider how to meet this requirement without introducing unnecessary friction. For instance, they could incorporate it into the savings account application process or into the onboarding process for new joiners. 

Funds held at e-money institutions – which cannot pay interest on e-money account balances- are not directly protected by the FSCS.