Financial wellbeing – sprint or a marathon?

We could all benefit from managing our money more efficiently and we don’t always look after our financial wellbeing in the way that we should.

Most people I know, personally and those I speak to through work, are more concerned with short-term issues such as the money worries they experience on a daily basis, rather than saving to ensure financial security in the future. Their long term financial wellbeing is just not as important.

Right across the earnings spectrum, people have pressing short term financial issues including meeting their mortgage payments, affording household bills or paying off debt.

These days, it’s a sad truth that employees value short-term gain over long term financial stability.

"These days, it’s a sad truth that employees value short-term gain over long term financial stability."

In the long run

Pensions are long-term. They don’t feature highly on people’s priority list, particularly those in the 18-29 age group and I predict pensions will increasingly fall down the pecking order as a way of employers recruiting, retaining and rewarding employees.

Of course, historically, Defined Benefit (DB) pension schemes were a key incentive for employees when they were choosing a job.  Defined Contribution (DC) pensions do not have the same draw that DB schemes did. Although, it’s much easier for employees to see the value of their DC pension, as employer contributions (and hopefully their own) accrue in their pot. 

Enrolling for the marathon

The recent introduction of Auto-enrolment (AE) has ensured that most employees have a pension and so far it has been deemed a success in the UK, due to the high number of people now contributing to pensions. 

Quoted ‘opt out’ rates are much lower than anticipated.  This is a bit disingenuous as the real test is likely to be in 2018 when employees will be expected to contribute 5% of their salary. It’s a possibility that employees will realise they can give themselves a 5% ‘pay rise’ by ceasing active membership. The other obvious bonus here is that this wouldn’t be recorded as an opt-out for the employer either! 

Marathon training

Employers are increasingly stepping in to help employees manage their everyday lives.  My colleagues, Julia and Carl, have spoken about offering employees real choice at appropriate times as well as offering benefits that offer value to both the employee as well as the employer.

The only benefit that employers have traditionally offered in relation to financial wellbeing is long term pensions.  Our survey, Generation Why?, focusses on generational attitudes towards saving.

Key findings highlight that:

Our research shows that financial security and wellbeing presents a real concern across all demographics which has a significant impact on the employer.

From our experience, financial stress from outside the workplace is often the cause of staff absence, which adds up to a huge yearly cost for businesses.

Race support

In the Workplace Wealth team we are doing some exciting work with clients to assist them in helping their employees with financial wellbeing.  This is not only managing ‘positive’ wealth such as short, medium and long term savings but helping to manage their negative wealth more efficiently.

Positive wealth management is fairly easy.  We know that inertia plays a key role in preventing active saving but employers who assist their employees to save by offering an easy access route, see a good employee take up.

There are many providers who offer workplace wealth platforms and we expect further innovation and development as well as the use of ‘institutional’ rather than ‘retail’ rates.

Helping employees manage debt is relatively new, although still a taboo subject.  However, it is often this area that requires the most support and where charges can be extortionate.

There are several ways that employers can help employees manage debt - some of which require the support of the employer. When looking at the implications of absenteeism, presenteeism, productivity and longer term employee engagement, we believe that helping employees with their financial wellbeing would prove to be quickly cost-effective.

Don’t forget your running shoes

So, how do we set our clients on the right track towards financial wellbeing? We focus on positive engagement for both the employer and employee.

Me2, our member engagement tool, works alongside our consultancy to offer solutions that promote financial wellbeing. It is something of which we are incredibly proud.

Each employer is different and each employee is different. Me2 engages the workforce and provides a tailored approach to benefit choice, allowing employees to make the relevant choices for them at the right time.