Pensions, pay, politics (and panic) - helping employees take financial control 


Working life used to be so simple. Employees entered their first job from age 16 then stayed there - possibly in the same company, probably in the same career - until around the age of 65. They then retired, either with an income for life related to their final salary or with no pension at all. Part-time working was almost exclusively the domain of women with young children, and "flexible" was a word rarely associated with any aspect of working life.

money fit

Today, the picture is very different. Employers' needs have changed and as a result, so have working patterns and staff expectations. Digitisation, globalisation and shifts in customer expectations mean that businesses are continually having to adapt the mix of skills they need in the workforce and become more and more nimble. People are working longer in life, and we've seen the resurgence of apprenticeships as a way of helping young people get started at work.

These changes have implications for employees as well. While individuals as well as businesses have moved away from a "job-for-life" mindset, that variety can come at a price. Muted pay rises, lowered job security, and the need to continually evolve skills to meet changing employer needs can be the flipside of a more dynamic working environment.

And while pensions auto-enrolment means more workers now have a pension, most will be far less generous than the final salary schemes of the past. A more international approach to business means that employees might spend periods of time in different countries, accumulating pensions and benefits that are very different from UK models.

Under pressure

As a result, employees are under pressure financially. Wage growth has failed to keep pace with inflation over the last year, meaning that pay is reducing in real terms. Shifting work patterns and the "gig economy" is also fuelling instability. A research report, The DNA of Financial Wellbeing 2017, carried out by affordable loan provider Neyber, found that a quarter of the 10,000 adults it surveyed had an income which fluctuated by over 10% each month. That figure rose to 45% in the 18-24 age group and 35% of 25-34-year olds.

Brexit, political uncertainty, as well as changes to tax and legislation are also piling on the pressure according to Neyber's findings. The UK's decision to leave the EU has affected the way that 35% of all individuals feel about their finances, rising to 51% among 18-24-year olds.

That translates into more and more workers worrying about their finances, and lower productivity at work as a result. And while employers often believe they are supportive of employees who are struggling, staff don't always see it that way. Neyber found that 56% of businesses believe that they help staff to manage money, but exactly the same number of employees say that their workplace gives them little or no support with this.

There could be many reasons for that disparity, such as poor communications or not offering the right types of support. However, employers are in a great position to help employees with their financial wellbeing and to feel more in control of their money. In practice, that could mean offering support with day-to-day budgeting tasks, through to enabling employees to plan for long term goals and retirement. It's not a one-way process - making sure employees can perform at their best in the short term, and are able to retire in the long-term is as important for businesses as it is for staff themselves.

Being financially well is important for everyone, but education and support can play a particularly significant role at the beginning and towards the end of an individual's career. When someone starts their first job, employers have a once-only opportunity to help them establish good financial habits that can last a lifetime.

Changing circumstances

As employees reach retirement, their financial needs and priorities will start to change again. Understanding how much they can expect to live on in retirement and planning for the implications of that means more than just company pension statements. It needs a holistic view of all of their savings - particularly if they have spent periods of time working abroad - and how that money could convert into income after work.

There are now more tools than ever before to help employees improve their financial wellbeing. Digital financial education and advice can be rolled out across a workforce, no matter how diverse their working patterns or location. Individuals have flexibility over how and when they access the information, and how they decide to act on it. Complementing digital support with face to face guidance, training line managers to help staff struggling with money, and using the output from services such as employee assistance programmes to design wellbeing programmes can all help to build a financially well workforce.

As the world of work becomes more fluid, employees are having to extend their skills and adapt their working patterns to keep pace. Helping them to stay financially well will make sure they are in the best possible shape to take on the future and perform at their best in the workplace.

Chris McWilliam is principal at Aon Employee Benefits. 

This article was provided by Aon Employee Benefits. 


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