09 Sep 2019

Emerging financial wellbeing technologies and how reward directors can use them to best advantage

Money worries are the most common cause of stress, according to Forth’s January 2018 survey. However, financial wellbeing in the workplace is slowly becoming the norm. But where should employers’ focus be and how can technology help?

A406-1567799279_EmergingfinancialwellbeingtechnologiesMAIN.jpg More than 90% of employees responding to our realigning the workplace savings offering to meet the needs of millennials (2019) research said they had financial concerns ranging from how to manage debt to worrying about saving for retirement. But the biggest concern across the board is simply not having enough savings; nearly 85% of employees agreed that a lack of savings was a financial concern, across all age ranges.

It’s not surprising when you consider that there are more than 16 million people in the UK with less than £100 in savings, according to the Money Advice Service.

To tackle financial stress and stop it impacting on productivity levels, a financial wellbeing programme needs to include a comprehensive education piece and provide information, advice or even solutions around debt management. These are fundamental elements. But unless there is behavioural change, an employer is simply helping to manage problems rather than helping employees avoid problems in the first place.

Workplace savings – the primary focus

With the introduction of auto-enrolment, employers are now well placed to tackle retirement funding. There are now more than 10 million new workplace pension savers since 2012. But it’s the events that happen before retirement that create a lot of financial stress.

Only 23.5% of employees are worried and therefore stressed by retirement planning. One of the biggest concerns, especially among younger employees, is how to get on the housing ladder; over 25% of under 35-year-olds state that this is their biggest concern.

There are several reasons why people don’t save. However, perceived unaffordability is a big one, with nearly 50% of employees confirming that their high outgoings were a barrier to saving. But accessibility plays a big part too, and this is where technology, especially robo-investing, can help.

Robo-investing as an enabler

Robo-investing is a concept that has developed since the Retail Distribution Review in 2006, which saw the end of adviser commissions and therefore access to affordable advice for a lot of employees. In the absence of affordable advice there needs to be more automated investment solutions available.

In a nutshell, robo-investing platforms provide employees with easy access to savings and investment products with a choice of readymade investment portfolios that are optimised and managed by computer algorithms. The buying process is simplified and so complexity should no longer be a barrier.

A lot of the investment processes are automated, which enables providers to deal with another barrier to investing – affordability. Minimum contributions can be as low as £10 per month.

More than 70% of employees confirmed that they would use a robo-investing service introduced by their employer and 44% confirmed they would be more likely to take-up any offer if the minimum contribution was affordable.

When incorporating this solution into a financial wellbeing programme, the contribution payment method should be considered. Contributions to other workplace savings schemes such as pensions are deducted from salary and employees are used to and comfortable with this. Investing through payroll should be allowed.

Finally, when considering a robo-investing platform, it is important to ensure that the full range of ISAs are available. For instance, a Lifetime ISA (LISA) can be a perfect product for any employee under 40 looking to buy their first home; with a 25% government bonus, (up to £1,000 a year) a LISA can really help younger employees get on the housing ladder.

This article is provided by Smarterly