Employee benefits: The start of your financial wellbeing strategy
Director of Employee Wellbeing
It’s now common knowledge among HR and Reward professionals that almost all employees and their work are negatively affected by money worries. Despite this, almost half of employers have yet to roll out a financial wellbeing strategy.
For most of us, money is synonymous with work. Our workplace is not only where we get most of our money and pay most of our tax, it’s also the place we are already making some pretty big financial decisions. After a mortgage, pensions are the financial product we put the most money into – and it’s likely our pension will be via the workplace. When we embarked on research alongside King’s College London earlier this year, we discovered that many HR teams felt their employees were being overwhelmed by the complex decisions they were being expected to make regarding their benefits – including pensions.
According to figures from The Pensions Regulator, more than ten million workers have now been enrolled in a workplace pension. A former Secretary of State for Work and Pensions stated that auto enrolment is, “an extraordinary success story.” Following this success, in April this year, ten million workers had their workplace pension contributions increase from 5% of their salary to 8%. However, the opportunity for employees to build up much needed, long-term wealth is likely being missed as many employees still don’t fully understand pensions.
Pensions in the UK are a complicated financial product. Even the Bank of England’s Chief Economist says, “I confess to not being able to make the remotest sense of pensions.” Compounding this confusion is the fact that people don’t like making complex financial decisions, so we have a perfect storm of poor knowledge, avoidance and apathy. Figures from the Office for National Statistics (ONS) say that people’s lack of pensions knowledge is affecting their ability to save for retirement. Shockingly, the ONS say this poor understanding of pensions has actually become worse, not better over the last few years.
Although employees’ pensions knowledge is worsening, their financial concerns are growing and the workforce is ageing, only a third of employers in the UK say they have reviewed their pensions strategy in recent years. As a result, only around 12% of employers are happy with their employees’ levels of pensions engagement. So, despite the significant attention being paid to pensions by employers (and the government) through auto enrolment, many employees are still heading towards retirement with inadequate savings and pensions knowledge. Pressure is now mounting more than ever on employers to proactively improve pensions knowledge and engage more employees with their retirement.
An uncertain future
In a new report by StepChange, people who experienced a life event in the last two years were three times more likely to fall into problem debt. In fact, almost half say they’ve experienced a significant life event, such as falling ill, in the last two years. Of those most at risk are people of working age, parents, renters and those in lower- or middle-income households. This lack of resilience against life events is driving UK problem debt significantly. This is why an employee benefits package can be one of the best places to start building your financial wellbeing strategy.
Many of the benefits offered by employers are designed to insure employees should the worst happen. When it comes to financial wellbeing, this is really important as we are helping employees make decisions that will prevent them falling into a worse financial position in the future.
In the modern world, we are expected to make hundreds of decisions every day. The pressure to make the right decisions can be overwhelming for employees. Some therapists have said that the complaint raised most by young people in particular, is that they have too many choices and are worried about making the wrong decision. Research has found that having too many choices often leads people to feel stressed and overwhelmed – by bringing benefits such as pensions, insurance, lending and financial advice together in one place, we are making these decisions easier.
Recent research by RAND Europe and VitalityHealth indicates that, although most employers offer a range of health and wellbeing initiatives at work, engagement with these is an issue for many employees. Less than 20% of employees say they are aware of where to go to access their workplace health and wellbeing initiatives.
One of the primary recommendations found in research by the FCA was that employers should seek to offer their staff a user-friendly, web-based portal that gives employees the opportunity to access useful information and education to better manage their money. Giving employees access to technology that simplifies and supports financial decision making is a great way to improve knowledge and engagement. Employees need content in an easy-to-digest way, with simple explanations, interactive content, calculators and tools, and most importantly, the opportunity to make better informed benefit decisions.
The ultimate wellbeing guide
Find out how OneHub can streamline your wellbeing initiatives, and help to improve your employees’ understanding of their own financial wellness.
Gethin is a psychology graduate who has been helping some of the world’s largest organisations to improve their employee experience and wellbeing for almost two decades. The last 8 years have been spent working as part of the senior leadership team here at Benefex. As a frequent writer and speaker on employee experience and employee wellbeing, Gethin has been featured in The Guardian, The Huffington Post and The Financial Times as well as major HR, Reward and Pensions publications. Gethin is also a regular keynote speaker and guest lecturer at events, and a founding member of the Engage for Success Wellbeing Thought Action Group. He is also listed on the Employee Engagement Powerlist and one of Cardiff Life’s ‘One to Watch In The City’.
In 2018, Gethin published his first book - the 5 star rated Amazon HR bestseller ‘A World of Good: Lessons From Around the World in Improving the Employee Experience’, which has gone on to inspire HR and Reward teams at some of the world’s best known brands.