Poor financial literacy is a key wellbeing risk
Many workplaces are increasingly recognising poor financial literacy as a key financial wellbeing risk – 63% in 2023 compared with 58% in 2022.
That’s according to the Reward & Employee Benefits Association (REBA), in association with WEALTH at work, which has launched the second in its series of workplace research – Financial Wellbeing Research 2023, with responses from almost 200 companies representing more than 1.5 million employees.
Employers also expect financial pressures such as high childcare costs (64%), rental costs (66%), high consumer inflation (75%) and energy prices (77%) to continue to be a risk to the financial wellbeing of their staff. Albeit, energy costs and consumer inflation are notably less of a concern than last year (91% reported high energy prices and 81% reported consumer inflation as risks in 2022).
Instead, 53% of respondents say they will increase financial wellbeing spend.
Coping with an ageing workforce
The survey also found that employers see the ageing workforce as increasingly important, with 29% citing that it will drive financial wellbeing strategy over the next two years.
Meanwhile, 44% say they plan to offer targeted support for the over-55s during the same period – an increase from 17% and representing a 159% increase in the past two years.
Specifically, pre-retirement planning is set for a 68% boost. These findings may be due to concerns over employees accessing their pension early, as 17% of employers reported that this will also be a driver of future change.
Another notable focus for employers will be tackling financial distress in the workplace. The survey found that 44% say that it will be a driver of change in the next two years.
Jonathan Watts-Lay, Director, WEALTH at work, says: “As employees continue to feel the impact of rising costs, supporting employees with day-to-day needs should be the immediate focus, alongside providing support around longer-term needs such as savings, pensions and preparing for retirement, especially for those considering accessing their pension early.
“It’s well known that when individuals do not fully understand their finances and how to address current difficulties and mitigate potential risks, it can result in stress. A lack of understanding of their finances could also result in employees making poor decisions which can prove costly, especially at retirement. Helping employees understand the key financial issues that relate to them is an effective way of overcoming the risks of poor financial literacy.”
Future of financial wellbeing support
The research also found that support is growing for savings products. Employers offer, or plan to offer in the next two years, pay-as-you-earn saving schemes such as help-to-save and opt-in payroll savings (34%), employee share plans (42%), tax free saving wrappers including ISAs (45%), and long-term incentive plans (54%). Wage advance schemes are also rising in popularity, with 37% set to offer this within the next couple of years.
The number of employers offering independent financial education, guidance and advice is set to almost double. Employers offer or plan to offer in the next two years, financial education from an independent provider (62%), financial guidance (67%), and advice on general finances (56%), or advice specific to retirement (60%). In fact, financial coaching is also set for significant growth – 12% of employers currently offer it but 41% plan to within the next couple of years – a 241% increase.
Overall, the research found that workplaces recognise that financial wellbeing is an integral part of improving wider employee wellbeing (96%). Not only is it important for increasing engagement (95%), but it is also linked to other HR objectives such as recruiting (85%) and retaining (93%) employees, as well as improving employee performance/productivity (86%).
However, while 76% of employers say they offer some or lots of relevant financial wellbeing benefits or services, they recognise that these are not part of a joined-up strategy. On a positive note, 74% of employers plan to join up their financial wellbeing offerings and benefits over the next two years.
Strategic thinking needed
Jonathan Watts-Lay, Director, WEALTH at work, says: “It’s good to see that employer’s focus has shifted to helping employees by providing them with tools to better manage their money and support is growing for savings products to build financial resilience. As this report highlights, there is a clear need for financial wellbeing to move from tactical to strategic thinking.”
He warns; “However, it is concerning that wage advance schemes are rising in popularity. While they may be suitable to help in an emergency cost such as urgent car repairs, they are not a long-term solution to financial problems. They should always be offered alongside financial education, so that employees understand this.”
Watts-Lay adds: “Of course, financial education is the key element which underpins all financial wellbeing initiatives. After all, financial wellbeing is about being able to make informed choices about your finances. So it’s good news that support for financial education from an independent provider, guidance and advice is increasing. Also, the growth in financial coaching could be because employers now recognise that in some instances, employees need one to one support.
These services should help employees better manage their finances including how to manage a budget, debt, save for life events and, eventually, how to prepare for retirement, he says.
“However, for any financial wellbeing programme to be successful, it’s important that these services are tailored to the audience and that it’s accessible to all – and most importantly employees should understand what support is available, as well as how to access it and make the most of it.”
Debi O’Donovan, Director, REBA says: “To date, thinking around financial wellbeing has largely been tactical rather than strategic. However, with our research showing increased emphasis on wider HR strategic issues, such as workplace sustainability, employee wellbeing and planning for an ageing workforce, through to filling talent gaps and meeting diversity, equity and inclusion objectives, we expect to see a switch to prioritising strategy and joined-up financial wellbeing over the next few years.”
To read of full copy of the report, click here.
In partnership with WEALTH at work
WEALTH at work is a leading financial wellbeing and retirement specialist - helping those in the workplace to improve their financial future.
