29 Nov 2023

Close Brothers survey reveals change in UK financial wellbeing

Latest research shows employee money worries have grown since its last survey in 2019. But there is some good news too

In 2019, Close Brothers measured the financial wellbeing of UK employees.

In conjunction with Opinium and Professor Sir Cary Cooper, the Financial Wellbeing Index report drew four main conclusions:

The overall score for employee financial wellbeing was 54 (out of 100), so there was plenty of room for improvement.
There was a common misconception as to which areas of personal finance were the biggest issues, with debt and pensions the most commonly cited. However, the research showed that the lowest scoring areas were budgeting and planning, at 49, financial protection, 43 and tax, also at 49.
When it came to workplace wellbeing, fewer organisations were giving financial wellbeing the same focus, priority and resources as they were for others areas such as mental wellbeing.
There was a huge disconnection between companies’ assessments of their employees’ financial wellbeing and the true picture presented by employees. Employers were over-optimistic, giving an overall index score of 70, compared with the employee score of 54.

Financial welbeing under pressure

In recent years, UK financial wellbeing has taken a battering: the Covid-19 pandemic, employees and organisations adapting to more hybrid working, the highest rate of inflation in decades, significant rises in the cost of living, continued market volatility and mortgage rates at their highest rates since the late 1990s. And, as most of these challenges have also been unforeseen and beyond anyone’s control, they have affected not just finances, but financial anxiety too.

Four years on, and in light of the challenges faced since the report, Close Brothers decided it was time to repeat the index to see where UK employee financial wellbeing stands now and how that compares with 2019.

In its latest research, ‘Spotlight on UK financial wellbeing’, Close Brothers examines, among many other things, the financial wellbeing index of UK employees in 2023.

Some of the results may be surprising. On one hand, more companies have pushed financial wellbeing up their agenda. There has been an explosion in workplace financial wellbeing providers: new ones entering the market and many existing providers, (pensions, benefits, workplace loans, workplace savings providers, etc) adding financial wellbeing to their services.

So, it would be reasonable to expect a dramatic improvement in financial wellbeing.

But personal finances are still under pressure, the economic environment is still uncertain and the last few years have eaten into many people’s financial reserves.

Change in perspective

The good news is that, overall, the UK financial wellbeing index has improved by 6% compared with 2019, up from 54 to 57. However, this overall score masks the full picture, with some dramatic improvements in some areas of personal finance – a 37% increase in the area of budgeting and planning for example – and significant drops in other areas.

It is clear that the financial wellbeing index doesn’t only provide insight into absolute measures at a point in time, it also indicates how employees are feeling about their finances. The scores show that employees’ financial anxiety is a stronger force than the underlying numbers show.

Employees are worried about money - the financial worries index score has increased by 11% - their confidence in the future has been severely dented and they are left with a feeling of financial insecurity.

Around 28% of employees are unhappy with their finances, with 36% of employees worrying about money always or often. These money worries have consequences, with one-quarter (24%) of employees confirming that this affects their work, 22% saying it affects their mental health and one in five (19%) saying it affects their sleep.

While there has undoubtedly been improvements in UK financial wellbeing over the last four years, employees are still grappling with pervasive, difficult and complex financial challenges, many of which are outside their control.

There’s still a long way to go and there’s definitely an urgent and serious need for organisations to understand what employees are dealing with and to shift the focus and support being provided so that it better meets what employees need now.

Failure to do so will not only hit employee financial health, but mental wellbeing and business performance will suffer too.