Employees put their long-term financial health on the backburner
Almost half (47%) of UK employees are suffering from a crisis of confidence and are agonising over their long term financial health, according to the Willis Towers Watson and Nottingham Business School study 'The Saving Psyche of the UK'.
Although a comfortable majority of respondents claim they trust their own judgment on financial decisions (67%) and think they know the right questions to ask (63%), this confidence does not transcend to the decision-making moment of truth.
The findings uncovered a significant confidence pinch point when it comes to crunch-time and committing to long-term saving goals.
Choice and complexity overload, significant worries about risk, general lack of trust and a tendency to doubt and agonise over decisions all combine to inhibit decision-making significantly.
Too much choice and complexity when it comes to savings initiatives can cause inertia and contribute significantly to decision-making paralysis. Choice tends to add to confusion and procrastination; people say they want choice but what they really need is direction.
The delay in making a long-term savings decision is exacerbated by the unpredictable economic climate, which has made workers risk-averse and more likely to prioritise immediate and tangible investments, such as buying their first property.
Agonising over decisions
The fact that almost half of workers (47%) agonise over financial decisions also acts as a significant impediment to long-term savings goals, as does mistrust of sources of financial advice and knowledge.
Workers are turning from traditional sources of financial information, such as employers, banks and financial advisers, towards more modern choices, such as money advice websites, online banking and comparative websites. In fact, only 6% chose their employer as the most trusted source of financial information.
The study also found that, even where savings are being made, long-term savings take a back seat. Whilst 40% of employees believe saving is a priority, most are focusing on short term savings for holidays (55%), as opposed to preparing for their future, such as retirement funds (47%).
People are most prepared to forego current expenditure when they can see an obvious reward for doing so in the short term, often to the detriment of their financial well-being.
The results of this study highlight that a new way of thinking about workplace saving is required in order to end the decision-making paralysis, address the savings shortfall and ensure that employers are able to take a responsible and active role in the financial well-being of their workforce.
A focus is needed
Employers should focus on providing personalised and timely information about savings options to their workforce.
By consistently providing information at a time when people need it most, they can build confidence and engagement simultaneously. Once engaged, employers have a channel through which to communicate important messages, nudging employees to take ownership of their own financial health at significant points in their life.
By nudging employees to engage in more suitable behaviour, using approaches that make the choice process significantly more user friendly, workers will become empowered and can take ownership of their own financial health, with the support of their employer.
But when designing those communications, employers must remember to take into account the characteristics and diverse economic and social circumstances of their workforce.
Six saving persona types emerged from the research, which encapsulate the vast range of saving attitudes in the UK. The saving habits of the six groups are: apathetic savers (27%), surburban savers (19%), financial worriers (14%), short-term savers (15%), you only live once (YOLO) (15%), risk takers (14%).
To find out more about each of the different personas and how to engage with them, download the savings psyche report here.
This article was supplied by Willis Towers Watson.
In partnership with WTW
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