The employer role in financial education
Financial wellbeing has a knock-on effect for employee health and workplace productivity. Close Brother’s Jeanette Makings calls on employers to help
The UK is facing a personal savings crisis. Too many employees are failing to save enough, and when they do save they are ill-equipped to ensure the most suitable saving choices and so their savings are not wholly effective. This can result in financial stress impacting performance at work; low uptake of workplace benefits hitting productivity, engagement and retention; and difficulty in planning retirement dates. Employers are not only well placed to help solve the problem, but they also have a significant financial interest in doing so.
The Lifetime Savings Challenge Report 2017, which was carried out by Close Brothers in conjunction with the Pension and Lifetime Savings Association (PLSA), sought to understand how employees are saving, where they need help, and the level of support available to them from their employers.
The report revealed a significant savings shortfall. A third (33 per cent) of UK employees were saving less than £50 a month, which includes one in five (20 per cent) who admit to not saving anything at all. Alongside this lack of saving is a lack of understanding about the best way to save, with only two fifths (40 per cent) of employees confident in their ability to choose the right financial product to help them achieve their savings ambitions.
Employers are aware of these issues. Three in five (60 per cent) employers recognise that some of their staff don’t have sufficient savings, including pensions. And although they believe this is partly due to them finding saving unaffordable (29 per cent) or them having too much debt (21 per cent), it’s also because they find the savings landscape too complicated (20 per cent) and don’t understand the choices available to them (15 per cent). These latter issues are the ones employers are well placed to tackle.
Employers taking responsibility
Employers are taking an active role in solving this problem. Two thirds of employers (65 per cent) think the responsibility for improving employees’ financial wellbeing lies jointly with them and their employees, and one in four (27 per cent) employers are looking to launch financial education initiatives for staff in the next three years.
It’s encouraging that employers are looking to take action, but it is critical that they plan support that will be most impactful. Currently, less than a quarter (22 per cent) of employers who offer financial education do so via group face-to-face sessions, with 20 per cent offering individual face-to-face meetings and 8 per cent offering access to advice over the phone.
However, of those who provide financial education, 62 per cent believe face-to-face is the most effective way to increase the understanding of personal saving and engagement among employees and 57 per cent of employees say it is their preferred communication method. Interestingly, perhaps bucking the myth that younger employees prefer digital communications, these face-to-face preferences spanned all age groups with 59 per cent of 18-34 year olds, 54 per cent of 35-54 year olds and 62 per cent of those aged 55 and above stating this preference.
Importantly, when it is applied, financial education in the workplace works. Of those employees that have received financial education, 70 per cent said it had been useful with only 13 per cent finding it was either too complicated to follow or just not useful.
The question I’m often asked is ‘is it worth it’? And the answer is a resounding yes. Our 2017 research in conjunction with the CIPD found that at least a quarter of people are suffering with money problems so substantial that it is affecting their ability to do their job. This isn’t surprising when as many as one in five employees (19 per cent) are losing sleep due to financial concerns, and one in ten say they have find it hard to concentrate/ make decisions at work because of money worries.
Financial wellbeing is one of the personal elements that can have an impact not just employee health but also workplace productivity, staff morale, and retention. Investment in financial education is therefore not just a decision based solely on responsibility towards your employees, but a simple step towards boosting your bottom line.
It’s a win-win.