Financial wellbeing: we can do better

Gethin Nadin

24/08/2017
Categories: Wellbeing, Tech

Employer-sponsored financial wellbeing has been around for some time, but has really gained momentum over the last five years.

Almost five years ago, we partnered with Barclays to build MoneyWorks – one of the UK’s first content-led employee financial education tools. MoneyWorks is used by some of the UK’s biggest employers to this day and will be re-launched later this year.

When they first partnered with us, Barclays released some market-leading research that mirrors what we are still seeing today:

We ran a webinar with Gabbi Stopp and Gemma Godfrey, to get their take on the effectiveness of current financial wellbeing schemes, and future trends as well.

Does this research reflect what you are seeing in the financial education market?

Gemma:
We’re seeing a real thirst for knowledge. Financial services are traditionally full of jargon and obstacles, which leads to a massive educational gap, and many feel as though they are being left behind. Money isn’t going as far as it used to. The financial crisis saw people losing faith in “experts” who would say “just trust me” when it came to their money. So, we’re seeing people move from “do it for me” to “figure it out with me; help me be smarter about money.” Employers need to tailor financial education around their employees’ life stage. This is where technology steps in; you can give people access to their finances whenever, wherever.

Following Brexit and austerity, what do you see as the current State of the Nation?

Gabbi:
The income gap is real and it’s widening; we’re at an inflexion point. Official measures see inflation at 2.9%, whereas wage growth is lagging at 2.1%. Added to this is the toxic combination of increased housing costs, increased utility bills, increase in personal debt; low interest rates; and rising cost of living. In comparison to 30 countries in the OECD; the UK’s income gap is the 7th most unequal. 40% of income in the UK goes to 20% of households. Anyone thinking “that can’t be happening to my workforce” is unfortunately wrong.

New research by Neyber reveals that 33% of the workforce is still worried by financial concerns. So, it seems that current financial wellbeing strategies aren’t having a great impact.

Gemma:
Things aren’t going to get better for families; money isn’t going as far, and with low interest rates, savings aren’t growing. But in terms of the situation improving, there is hope; families are taking back control. What we’ve seen on Eat, Shop Save is a real willingness from people to learn more and to improve. There used to be a reliance on a state, but now, people want to take action in their own situation. People are taking those first tentative steps towards this.

Gabbi:
The income gap only benefits the affluent and the very, very affluent. However, as wages increase, technology is a democratising tool; it puts the power back into the hands of the consumer and employee. It’s about them pulling for the information they want, rather than advisors pushing information that may not be relevant onto them. It may be a pessimistic economic outlook, but there are more tools now available for people take ownership and manage their money.

Alongside our partners at MoneyDashboard, we’ve been able to mine the data to find out what the state of the average working adult in the UK is at this very moment in 2017.

  • On average, of money leaving a current account, 91% is spend, 8% is repaying credit, and only 1% goes into savings.
  • 47% of their users have an overdraft facility, with almost £5,000 credit line on average.

Gemma:
The earlier you start investing, the smaller the amounts you need to put aside each time, and the more time you give your money to grow. The problem with pensions is that people find them complicated, confusing and inflexible. What we have to marry up is this importance to get people to save for their future, but with the recognition that we need greater options, so what we’re not doing is giving people an “Either/or” option when it comes to short-term debt recovery vs. long-term savings.

What kinds of myths should we be tackling when it comes to financial wellbeing?

Gabbi:
There are three things that we run into time and time again:

“I don’t have time to find out about my finances”
Saying you don’t have time is just burying your head in the sand, and we need to fix that. The onus is on us to make sure that we are delivering not just the information that the employee is asking for, but that we are delivering it in a way that they can own when and how they find out about it. What you deliver has to be omni-channel and device-agnostic. The employee is going to decide when they are going to access information; it must be at their convenience.

“I can’t afford to save more money”
My challenge to this is what I call ‘the coffee question’; if you buy a coffee every day on your way to work, then you can afford to divert some of that money elsewhere into an investment or a ShareSave scheme for example. Nobody ever suffers from scrutinising their own spending habits at either end of the earnings scale.

“I won’t be working here long enough to benefit from this”
The company that I was working for offered annual Freeshare awards. There was a core of a few hundred employees who wouldn’t accept them as they wouldn’t be working there for long enough. However, what we found was that a large number of these same employees were with us more than three years later. There is a real missed opportunity. It’s a tough issue to tackle but it is worth tackling.

What trends are we seeing in financial wellbeing?

Gemma:
There’s a huge demand for digital: 90% of UK banking will be online by 2020; over 70% of staff want to access their benefits online. The reason we’re seeing a tech trend in financial wellbeing is the likes of Uber etc. are not creating a new industry; they’re solving an existing problem -  people want that ease of service and ease of use. Traditionally to do something in financial services, it would take weeks of paperwork, but at Moola we had someone go from a standing start to investing in just five minutes. People would be more excited about a financial offering from the likes of Amazon, Facebook or Google than they would from their bank; the reason being that they are more tailored to their personality.

Gabbi:
We have a big problem with our attitude to money; it’s still such a taboo subject, yet debt is the norm. Financial education is now part of the curriculum, finally, and what we’re finding is that parents are having to learn about finances alongside their children. So, in terms of wellbeing, we’re still seeing this toxic combination of the normalisation of debt, the lack of education in the past, and there’s also a relentless targeting – primarily of younger women – by marketing and the media to impulse-buy and treat yourself.

By 2025, according to Deloitte, 75% of workers will be under 40-years-old. The largest portion of the workforce will have grown up through more difficult economic times than their parents. House prices have grown far higher than wages since 1980 - on average 7% a year. According to the London School of Economics, real wages of the typical (median) worker have fallen by almost 10 per cent since 2008. House ownership has fallen the biggest since 1981 for the youngest workers. There are less people aged 16 – 34 now who own their own home than there has been in the last 20 years.

Gabbi:
As a result of this, we have seen unprecedented take-up of the Lifetime ISA. Building societies who are offering it have seen huge demand for help-to-buy type programmes. So, it’s a real myth that so-called Millennials aren’t interested in home ownership.

Gemma:
There is a fundamental lack of understanding when putting aside money for house buying. In the UK, we are obsessed by owning property. Parents are lending £1.5billion more than they did this time last year. This is an issue not just for the young, but older generations are dipping into their retirement savings to help their children out if they are able to do so. Financial planning is key to avoiding this pitfall. Identifying how much financial deposit is required; figuring out your time frame, and calculating what monthly savings you need to put aside in order to get there are the three steps you need to take to prepare for a deposit.

Gabbi:
The most off-putting part of the process is that huge sum of deposit money to find somewhere. This is where SAYE really is the unsung hero as it breaks this down into manageable monthly chunks. Employee payments are deducted from post-tax pay through payroll; you can’t spend it! So, the savings are adding up each month, and the employee has a right (not an obligation) to buy those shares at the end of their 3 or 5-year contract. The interest and any bonus is tax-free, and you don’t pay tax or NI on the difference between what you pay for the shares and what they’re worth.

Aside from the various financial wellbeing tools on the market, employers need to be conscious of what they currently offer and what they could offer in terms of benefits to improve their employees’ financial wellbeing.

For example, income protection will be a benefit that a new homeowner will need, as well as life assurance. Once an employee has made the investment in a home, are you able to help them by offering the benefits they will need to secure their home should the worst happen? You may even already offer these types of benefits, so employees need to be educated to the value of these existing benefits and how they can help them achieve their financial goals – that could be a simple.

We surveyed 14,000 employees using OneHub to find out what types of benefits employees wanted:

Employees are more interested in getting benefits that appeal to their lifestyle rather than their future. How can we encourage younger people to think about their future?

Gemma:
Life events are normally triggers for people to start saving money. What you need is a mixture of financial wellbeing products which enable people to achieve short, medium, and long-term goals. In your communications to employees, you can use life events as triggers, but increase awareness that a lot of these goals take time to achieve, so the education piece is a key part of that toolkit. www.moo.la/employers

Within OneHub, Benefex’s clients have the ability to integrate various financial technologies to help their employees improve their financial wellbeing. This approach means that whoever your employees are, whatever stage they are at in their lives and whatever their immediate and future needs are, we can help.

If you would like to find out more about how OneHub can help you with your financial wellbeing scheme, you can read more here

See the full range of products and services on offer in Benefex’s Financial Wellbeing Ecosystem.

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