Workplace financial-wellbeing support

Life has thrown a number of challenges our way over the last few years and money worries are now a bigger concern for many of us in what has been dubbed ‘The cost-of-living crisis.’ The Office for Budget Responsibility has predicted that living standards in the UK will fall at the fastest annual rate since the mid-1950s. The Government’s economic forecaster says household disposable incomes will drop by 2.2% per person in 2022-23 due to soaring inflation.

So it’s not surprising that four in ten (39%) UK workers have reported feeling increasingly worried about their finances as a result of the pandemic, according to research by Close Brothers. The ‘Expecting the unexpected’ study of 2,000 employees, carried out in January 2021, also showed that women and young people were feeling the most anxious. A quarter of female employees (24%) felt financially unprepared for the coronavirus crisis and subsequent lockdowns, compared with 14% of men.

Jeanette Makings, Head of Financial Education at Close Brothers, says financial guidance is an essential part of a company’s wellbeing offering. “Every company we talk to recognises that finance is part of the wellbeing jigsaw and that you can’t fix wellbeing overall without addressing financial health,” she notes.

“We know that if employees are worrying about money, it’s going to have an impact on their performance. If money worries are affecting their sleep and they’re then coming into work and making critical decisions affecting their people, their business and their clients, their performance and productivity will suffer.”

In fact, three quarters (77%) of employees believe that their financial concerns impact them at work, according to the Close Brothers Financial Wellbeing Index. The survey of 5,000 employees, published in March 2019, revealed that 40% worry about money always or often.

Another landmark survey into financial health revealed that one in four adults were in debt last year. The study by the Financial Conduct Authority, published in February 2021, found that the number of people struggling with low financial resilience (defined as debt, low savings or low or erratic earnings) increased by a third to 14.2 million, and that more than half of us were struggling with our finances.

Encouragingly, a growing number of organisations have made financial education a priority over the last two years, says Makings. “Employers know that many people have had to dip into their emergency-savings pot and be more resourceful than ever since the start of the pandemic.”

One small silver lining has been the way the Covid crisis has made people focus more on their spending and changed their attitude to money. “During the lockdowns, people have been spending much less and have recognised the need to make themselves more financially resilient in the future. I think some of those positive behaviours will be long-lasting,” says Makings.

This trend of being more mindful about money has continued with the move to a hybrid workforce. “People are seeing the benefit in their own pocket of saving money on train fares, takeaway sandwiches, lunchtime shopping and all the other day-to-day costs of office-based working, and they want that to continue,” Makings explains.

However, the situation in Ukraine has, understandably, caused a significant rise in global anxiety. “We can see the sheer hell the people in Ukraine are going through and we can’t help but worry about how we’re all going to be affected,” Makings acknowledges. “We know oil prices are the highest they’ve ever been and that all the financial indexes have been impacted, so it’s easy to see why people worry when they see big drops in their pension pots and other savings.”

A recent report by the Money Charity showed that a fifth of UK households have struggled to pay their TV, internet and phone bills over the last year and one million people had gone an entire day without eating because they couldn’t afford to put a meal on the table. The report, published in February 2022, showed that the average adult had £3,745 of debt.

So what can employers do to help provide financial wellbeing support?

Having a robust Employee Assistance Programme (EAP) in place is essential, for starters. “Many EAPs will have a debt counselling service that employees can use to start tackling this issue when they are in need of urgent help,” Makings explains.

Giving staff access to budgeting tools and a financial education programme that helps them understand the importance and impact of taking small steps can also make a real difference. “A financial education programme from a trusted and impartial expert that helps employees to make the most of the financial opportunities in front of them, and that explains other personal finance (such as personal tax codes, retirement savings and share benefits), can be well received and make a real difference,” says Makings.

Other initiatives can also be beneficial. “Having a financial education programme that is open and accessible – one that can support employees at key stages in their career, as well as on bitesize topics such as an introduction to investment, saving for children and how to deal with the estate of a deceased parent – can provide a genuinely personalised experience,” Makings explains.

“Planning for retirement is more complex now than it was, say, 15 years ago, before the default retirement age was abolished and when many more people had defined benefit pensions to rely on for retirement,” she continues. “Then, you knew when you were going to retire and what you would get from your pension.”

Nowadays, people need to decide when they can retire and plan for how they will fund their income in retirement – and in times of volatility like the present, many choose to defer retirement. Also, as more people are now retiring with defined contribution pensions as their main source of income, there are lots of decisions they need to take in the countdown to retirement, at retirement and throughout retirement, and many aren’t sure what’s best or where to get advice, says Makings.

The Close Brothers ‘Expecting the unexpected’ survey also showed that almost one in five (19%) employees aged between 65-74 and 14% of those aged 55-64 have delayed their retirement as a result of the pandemic.

Older employees are now looking at other financial resources, including savings, ISAs and downsizing, to fund their retirement years. “There’s a recognition that retirement isn’t just about your pension and that it can be funded by other means,” says Makings. “People really want to understand how it can work for them.”

Meanwhile, when it comes to younger workers, she believes there are some values emerging which are useful to for employers and providers to understand. “They are prepared to work hard, but social purpose, ESG (environment, social and governance), supporting the community, taking care of the planet and having a life outside of work are all important factors for young people coming into the workforce today,” she says.

As Makings suggests, these differences in attitudes to work and money between the various generations that make up the workforce illustrate why there’s no one-size-fits-all solution to providing financial wellbeing support for employees. A flexible, personal and impartial service that can help to maintain people’s mental health and productivity is all the more important at a time of financial and geopolitical instability such as the one we are currently living through. Ultimately, employers can’t afford not to support their people through these uncertain times.