Make your financial wellbeing strategy count in tough times.


Covid-19 has brought on many money worries which has had a direct effect on employee financial wellbeing, with many feeling greater levels of anxiety.

Learning how to manage on a reduced income is crucial during these uncertain times, especially if employees are facing a fall in their overall household income due to either themselves or a partner facing reduced work or redundancy.

What employees can do

In this situation, employees need to work out what their new income will be and budget accordingly. They should work out what available savings and assets they have such as pensions, ISAs, property, investments and other savings. They should then consider what expenses and liabilities they have such as a mortgage, debt, childcare, insurance, utility bills and other household bills. They can then look at any other household income including any salary or if they have a redundancy package. If the amount of money they need each month is more than the amount they have coming in, they will then need to work out what action needs to be taken to cover the costs.

By getting their finances in order, it may be possible for employees to free up money to pay off debts or to live off.

In particular, employees should speak to their mortgage lender or landlord to find out what their options are if they are struggling to make payments.

When it comes to overdrafts, credit cards and other debt, lenders are required to provide support to those struggling. If employees are struggling to make repayments, it may be possible to defer them or receive an interest free overdraft.  It is always worth paying off expensive debts and those with higher interest rates first. Importantly, employees should speak to their providers before missing payments.

Employees can make significant savings by utilising discount vouchers and employers should make sure that staff are aware of any discount schemes available through the workplace. A lot of money can also be saved by shopping around for cheaper utilities and broadband providers.

It may be tempting for employees to try to save money by reducing or pausing their pension contributions. However, they should plan carefully before doing this because if they can afford to continue making regular investments during a market downturn, more positive long-term returns may be generated.

Employees who are facing retirement are probably feeling concerned if they can afford to do so right now. However, they may not realise that they could use the tax free cash from their pension to pay off any outstanding loans and mortgages, and without these debts they may not need as much as they think to afford retirement.

It’s also really important that affected employees understand how to make the most of their redundancy package, particularly those facing retirement. For example, by using some of their redundancy pay to directly boost their pension savings, individuals can reduce the overall tax impact on redundancy payments above the £30,000 tax free limit. However, what’s right for each employee will depend on their individual circumstances and many will need support.

What employers can do

With so many financially affected, improving employee financial wellbeing through financial education and guidance has never been so important.

Social distancing rules have meant that many employers have had to restrict attendance at face-to-face seminars and although they are a popular and effective method, providing digital solutions such as online seminars and webcasts are an engaging alternative.

Additionally, to help those at retirement, virtual one-on-one guidance sessions can be delivered via a video call or the telephone. This approach is particularly useful as it offers employees the support needed to help them clarify their financial situation and gain a deeper level of knowledge around their retirement income options.

It is vital that employers take steps to help their employees take control of their finances during this uncertain period. How companies manage it will have a huge impact on their future reputation and the retention and motivation of employees.

Increasing numbers of employers are putting financial education, guidance and regulated financial advice in place to help their employees understand the various issues surrounding their finances. Specialist providers can help employers who are unable to offer this support themselves.

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