- Financial education
- 5 minute read
You might be surprised to hear that it’s the first group, who are saving on average £267 per month - more than either of the other two groups.
That was one of the findings from our recent research, The Lifetime Savings Challenge, which explored how engaged UK employees are with saving, and importantly whether they are saving effectively. We asked 1,000 employers and over 2,000 employees of companies with more than 200 employees for their views on how they navigate the lifetime savings challenge.
Despite the scare stories that as a nation we are not saving and that young people in particular are paying little regard to their financial future, there are some green shoots of financial engagement out there. The majority of respondents are saving something in addition to their pension each month, and 35% say that their top savings goal is to have enough money to have the lifestyle that they want in retirement.
Most would argue that those green shoots are not enough – and our research also made it clear that all age groups could be doing more. One in five employees save nothing at all each month, and a third are saving less than £50. Women save a quarter less per month than men.
But a second clear trend emerged in our research. It’s not just the amount of money that individuals are saving that matters, but what they are doing with it and the guidance they are getting on how to make the most of it. Individuals do not feel comfortable with their own decision-making abilities, or with navigating their way through the current savings landscape. Only two fifths of employees in our survey said that they felt confident choosing the right savings product.
How do we help employees to join up the dots between their different savings options, and make sure that they continue to do so throughout their life?
Only 7% of the employers in our survey said they had received no proactive enquiries about personal finance issues from staff in the past year, so there is a clear need for support. But the types of information that employees are asking about may not reflect their true financial priorities. Almost a third (31%) of enquiries had been about the company pension scheme – compared to only 4% who asked their employer about saving for a house deposit and 2% who had contacted them about the financial implications of starting a family. Both saving for a house and starting a family will have a major effect on how and where employees put their money at that stage in their lives and so their financial wellbeing, these are clearly not subjects that employees associate with help from their employer. Despite the fact that 59% of employees trust the guidance they do receive from their employer on pensions, share plans and other savings benefits.
Instead, staff are more likely to use the media or a financial comparison website (37%), their own bank/ provider (30%), family and friends (22%) to research their finances. Yet these are not their most trusted sources of information – employees trust personal finance websites most (37%), then financial advisers (37%), then government organisations (30%). And whilst to those in the know it is clear that only financial advisers are in a position to look across all savings products and savings needs to help people make the best savings decisions, this research shows that this is not well understood by employees. .
Another good source of financial guidance is workplace financial education. But it is clear that despite this provision growing in recent years, 48% of employers now provide this and 27% are looking to introduce this in the next 3 years, these current programmes are not effective with 75% of employees saying that this financial education has not helped them to understand their savings choices and how to make good savings decisions. This could be a result of the current workplace education being too one-dimensional ie only focused on pensions or retirement, maybe because it is delivered by the pension provider or that current education is only offered to some employees or both.
The Lifetime Savings Challenge shows us that it’s by no means impossible to encourage employees to get engaged with their finances, although overall savings levels could always be improved. Among those that are saving, the will is there to do the right thing and create a immediate, medium and long-term financial plan, but many simply don’t know where to start, or how to make the most of their money. While employers might not figure right at the top of staff’s list of trusted information sources, they are perfectly placed to help.
Time is of the essence, however. We might have seen some good news in our survey findings when it comes to employees’ willingness to become more engaged with their finances, but the fact remains that individuals are not saving enough and are confused about where to put their savings. We have a responsibility to take action before the lifetime savings challenge becomes just too difficult to solve.