How to measure whether your financial wellbeing strategy is working

Addressing the country’s lack of financial awareness is increasingly falling on employers. It’s unlikely your latest round of recruits fresh from school and university will be savvy savers and informed investors, despite personal finances being taught in some schools. Many forward thinking businesses have now launched a financial wellbeing strategy, with plenty more seriously thinking about it. Financial wellbeing is far from being just a fad – reducing employee stress due to concerns about their financial situation could mean fewer sick days. And improving how well staff understand the company pension can also enhance the value they attach to the amount you pay in each month.

But just improving their understanding is not enough. They need to feel confident enough to make changes that will improve their financial future. This begs the question, how do HR measure all this?

This is a two pronged approach. You need to capture employee feedback and also analyse their decisions.

What do employees want?

Start by finding out what areas they want help with – is it debt, mortgages, household budgeting, retirement planning or perhaps saving for children? Once you know their challenges, you can devise a financial education programme that will meet these needs.

Whatever you opt for, it’s important to follow up afterwards to find out if you’ve helped your employees.

Analysing data

To find out if your employees are making the right decisions to influence their financial future, it’s important to focus on the data from your providers to analyse the decisions they are making.

What you measure depends on what workplace benefits you offer. The company pension is generally the bedrock of any benefits package so we can look at how this works. For example, at Hargreaves Lansdown, we look at seven different choices employees can make to interact with their pension. These help to inform HR on how effective an engagement programme is – particularly when it is benchmarked to similar companies.

The seven choices

Contributions – who’s electing to pay more than the minimum level set by their employer
Investment choice – who’s choosing their own investments
Pension transfer-in – who’s chosen to transfer old pension schemes into their workplace plan
Additional account – who’s started to save and invest alongside their pension, often for goals that are closer than finishing work
Online access – who’s registered to view their pension online
Monitoring – who’s logged into their online account to view their pension in the last 12 months
Death benefit – who’s nominated the person they’d like to receive their pension pot if they die.

We’ve chosen to monitor these seven behaviours because they can all have a positive impact on the value someone enjoys from their pension. Whilst you’d measure different behaviours depending on the aspect of financial wellbeing you’re delivering, it’s important that the monitoring takes place.

What does ‘good’ look like?

We think our analysis of employee pension engagement is a good illustration of how monitoring can work. With the pensions example, the results you achieve will depend on the make-up of your workforce – their tenure, age, salary and their savings. Evidence shows that people become more confident with their savings the longer they have been a scheme member and as their pension pot grows. Generally, the more people earn, the more they interact with their retirement savings, but there is a drop off among the highest earners, probably because they have to navigate a more complex set of rules.

Overall, we find half of pension members increase how much they pay in, and 22 per cent have built the confidence to tilt their pension investments to better suit their plans. Around six in every 10 pension members has registered to view their pension online – of these, two-thirds log-in at least once every 12 months. Around 20 per cent of pension members have nominated who they’d like to benefit if they die. This is an area where we think there is big room for improvement, but also the opportunity to trickle down information by target messaging a particular group, like new parents.

There are some notable habits based on the type of industry you operate in. Workers in the finance sector unsurprisingly tend to be most tuned into their retirement savings, particularly when it comes to choosing their own investments. Those working in legal and pharmaceutical companies are most likely to increase the amount they pay in, with staff at IT firms often logging on to see how their pension is growing.

Identify the gaps

All insight from staff surveys and the data on how they interact with products is useful in identifying gaps in your strategy. To evolve your financial wellbeing programme and to ensure you’re always improving the financial confidence of your staff, you need to know which groups in your workforce are engaged and more importantly, which ones need a bit more support.

The author is Nathan Long, senior analyst at Hargreaves Lansdown.

This article was provided by Hargreaves Lansdown.