Analysis: Cash plans - are voluntary schemes worth the effort?

“You have to really push to get employees to take them out,” he says. “I’ve seen plenty of voluntary schemes where only six or seven employees out of several thousand take them out. They can be virtually invisible. If a client asks about a voluntary cash plan I’ll put them in touch with a cash plan provider and leave it at that.”

BHSF's Hall, however, says that where a voluntary scheme is managed well the take-up can be significant, with the broker benefitting from the commission this generates. As an example he points to a scheme that was set up by employee benefits specialists Team Rewards for nationwide cash and carry company Batleys. This saw more than 300 employees sign up for its voluntary cash plan.    

Richard Rankin, managing director of Team Rewards, says he often puts voluntary cash plans in place that get as much as 25% to 30% take-up.

“If you only put details in the brochure or on the intranet you’ll get less than 1% of employees taking it up but if you work with a cash plan provider that’s proactive with communications you can get significant uptake,” he says. “We’re a fee-based business so the commission is immaterial. Instead we recommend voluntary cash plans because they add value to the employee benefits proposition and help to build the relationship with the client.” 

Simple to implement

And while the financial reward may be meagre, implementing a voluntary scheme can require very little work from the adviser. Once notified of a company’s desire to introduce a voluntary scheme, cash plan providers will take over and run the account management and communications programmes.

“We’ll go in and run the worksite marketing, visiting the different sites and speaking to employees about the plan. We’ll also provide copy for the intranet as well as other marketing literature to help increase take-up,” says Health Shield's Rendell.  

Because cash plan providers will be looking for volume, companies need to be fairly large when it comes to voluntary schemes. Although some providers will entertain smaller companies, Paul Shires, executive director, sales and marketing at Westfield Health, says a company needs at least 1000 employees to make a voluntary plan viable.

“In theory we don’t have a minimum but the margins are so small we do need volume to justify the work involved,” he explains.

Additionally, because the cash plan provider does all the legwork, the choice of provider is important. Hall recommends looking for a provider with national sales force coverage as this can make it easier to service a client, especially those that have sites around the country.

There is also some debate around the best way to get employees to sign up to voluntary schemes, with some providers siding with payroll deduction while others prefer direct debit with the employee. For instance while Shires recommends promoting direct debit so terms can be continued even if the employee leaves the company, Hall says payroll deduction is the better option.

“Only a handful of our 2,800 client organisations use employee direct debit. Payroll deduction is essential for employee buy-in,” says Hall.

Some commentators, however, do not even think advisers should bother with arguments over how to set up payment.

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