29th July 2020
It’s not uncommon for individuals to face financial worries at various stages of their life – whether that is dealing with debt, concerns over retirement savings or making their monthly budget work. Indeed given the financial implications on many household budgets of Covid-19 it is easy to see how financial wellbeing interventions will need to move up a gear or two over the coming months and years.
The link between debt, money worries and stress, lower productivity and absenteeism are increasingly recognised by employers and many are now looking for ways to support their employees.
In fact, a poll we carried out last year found that 90% of respondents believe that it’s becoming increasingly important to have a financial wellbeing strategy in the workplace.
With nearly half (46%) of all UK adults rating their own knowledge about financial matters as low and almost a quarter (24%) having little or no confidence in managing their money, we believe the best way to help employees feel secure about their finances is to provide them with the knowledge to make informed decisions throughout their career.
A big part of the solution is helping employees become more familiar with the basics of money management. Getting them to think about how they spend money on everyday items such as utility bills and insurance is essential. Another important principle is helping employees understand the difference between good debt and bad debt. For example, a mortgage is a form of good debt – it makes sense to have a loan in order to own your home as it is a stable, easy to manage approach to long-term borrowing. However, it should still be reviewed occasionally to ensure you have a good deal. At the opposite end of the spectrum, debt with high interest payments such as payday loans and credit cards can get out of control if they are not repaid quickly. The cost of paying the interest may force someone into even greater financial difficulty.
It’s also important to look at the employee benefits platform itself. A good starting point is to investigate if employees are taking up and using the benefits on offer. And if not, why? Is it because the benefits aren’t appropriate to the workforce, or are employees unable to understand either the way the benefit operates, or how it could help them? Making sure benefits are relevant and well-explained can really help take-up and improve personal money management.
One of the most crucial elements of employee financial wellbeing is retirement preparation. Research found that a staggering 83% of employers are either aware that their employees are not saving enough for retirement, or are unsure whether they will have enough to be comfortable. This may in part be because of affordability, which is why money management is so important, but it may also be that they do not understand the upside such as employer matches on pension contributions and tax relief.
The Pensions Policy Institute (PPI)’s Supporting Later Life report highlights how lower levels of financial capability can reinforce non-engagement and that difficult or confusing choices often result in people abdicating decision-making to someone else, or choosing the path of least resistance. This could result in many employees choosing default options at the point of retirement, when there could be better options available to them. The report also explains that many people struggle to understand how investments and retirement income products work, which is in part because of the perceived lack of clarity in product information, but also because many employees have little exposure to these products during their working lives. The answer to all this lies in providing employers with support around how best to manage their money, and the most successful way to do so is through the provision of financial education, guidance or regulated financial advice.
Financial education can be delivered in a number of different ways. Although face-to-face seminars remain our most popular and effective communication method, this may not always be possible as we have seen in recent months. Therefore, online education formats which include webinars, interactive games, webcasts, animation and tailored microsites with tools and quizzes can also be a useful method of communication and engagement. Digital nudges can also ensure that relevant messages and content are sent to different cohorts of the employee population at the most relevant time.
One-to-one guidance can be facilitated over the phone or through video calls so employees can discuss specific issues they may be facing.
As more and more companies adopt flexible ways of working such as flexi-hours and working from home, providing digital solutions to engage employees with their finances can help ensure the majority of the workforce are able to improve their financial wellbeing.
After all, employees shouldn’t be left to go it alone.