More than half of employers are preparing to revise their financial wellbeing strategies in the next two years, research has revealed.
But the report, published by the Reward & Employee Benefits Association (REBA) in association with Wealth at Work, suggests HR leaders need to take a more proactive role in this shift or risk being left behind.
The survey of 223 companies covering 1.3 million employees found that 51 percent of employers are planning changes to their financial wellbeing provision.
Employers identified cost-of-living pressures as the most urgent risk, with 61 percent set to address rising bills for energy, food and clothing within their wellbeing strategies. A further 58 percent will target cost pressures for working carers, including parents, and 37 percent will look at the impact of housing costs. Gender gaps (86 percent) and redundancy (39 percent) are also high on the agenda.
Financial stress is already recognised as a key driver of poor mental health. The vast majority (93 percent) of employers said improving mental wellbeing linked to financial concerns is either already being addressed or action is planned, while the proportion targeting financial resilience is set to double from 44 percent to 88 percent.
The biggest change is expected to come in how employers address the impact of an ageing workforce. Close to two-thirds (62 percent) said they plan to revisit this issue compared with 19 percent looking at it today.
Retirement adequacy
Concerns about whether employees will manage to save enough for a comfortable retirement are mounting. Employers cited personal financial pressures (78 percent), low financial literacy around pensions (71 percent) and low pension contributions (65 percent) as the top barriers over the next five years.
In response to these concerns, 92 percent of employers said they already provide or will provide financial education for older employees, while efforts to boost pension engagement for younger employees is set to grow from 50 percent to 91 percent. Access to investment advice specific to retirement is also expected to nearly double, from 28 percent today to 54 percent in the future.
However, employers acknowledged there are barriers to improving financial wellbeing provision. Nearly two-fifths (39 percent) said employees often do not know where to start when seeking help, 40 percent cited liability fears around offering support, 36 percent highlighted lack of take-up of existing support, and 32 percent said provision is not joined up.
Spend increases
Well over a third (37 percent) of employers are planning to increase financial wellbeing spend.
Popular forms of support, already on offer or in the pipeline, include financial education from independent specialists (51 percent), financial coaching (40 percent) and regulated advice (27 percent).
More than two-fifths (42 percent) of employers said they offer or plan to offer savings benefits such as employee share plans, with the inclusion of ISAs and other tax-free savings wrappers expected to nearly double from 14 percent to 27 percent.
Jonathan Watts-Lay, director at Wealth at Work, said: “It’s good to see that many employers are now focused on helping employees with a range of needs by providing them with the support needed to better manage their money.
“After all, supporting employees to improve their financial literacy through financial education can help them make well-informed decisions throughout their career – whether they are a new parent managing childcare costs, saving for a first home, or planning for retirement. Helping employees to take control of their finances reduces financial stress and can lead to improvements in financial wellbeing for all.
He added: ”The research identified that retirement adequacy is an increasing area of focus for employers. For people to better prepare for their financial future, it’s vital that they engage with their pensions as soon as possible.”
Debi O’Donovan, co-founder and director of REBA, said: “Mitigating people risk is becoming a core driver of financial wellbeing strategies. Inadequate long-term personal savings levels, ageing workforces as well as rising ill health and poor mental health are key catalysts. To react appropriately, employers are needing better data in order to implement effective strategies, as well as justify return on investment.”
