The great majority of an employee’s current and future wealth and financial well-being is dependent on their employer to a large extent. This goes beyond simply today’s salary and reward package, but includes funding future retirement through pension plans and employee share plans. The average UK pension pot currently sits at around £30k (pensions regulator, 2015), while it’s estimated the average person will need to have at least £250k in their pot for a modestly comfortable retirement (Which?).
Research by Equiniti (H2 2016) found that 50% of respondents don’t expect to have, or don’t know if they will have, enough money to live on in retirement. Respondents indicated that they were well aware they were not saving enough to fund the comfortable retirement they aspired to, so what exactly is stopping them saving more? Perhaps surprisingly, the answer is not just lack of disposable income; but wider and more complex. Yes, disposable income and affordability play a significant part (67% cited this), but a further fifth of respondents (19%) indicated they are just unsure about what to do.
Faced with this level of uncertainty, we might expect to see savers seeking professional financial advice, but Equiniti’s survey found that only 29% were likely to take this, with just under half (42%) relying on media for their main source of information. And in addition, only 1.8% would consider seeking financial advice from their employer; the primary source of their income is trusted to provide that income but not turned to for guidance on how best to maximise it for a comfortable retirement.
Perhaps employers need to step up their game and consider partnerships with companies able to provide financial advice in order to better equip employees to understand and manage their financial concerns.
Employers today are faced with a key opportunity to add real meaning to ‘employee engagement’ by focusing more keenly on the requirements of their employees. Alleviating employee financial stresses has been shown to have a positive impact on workforce effectiveness and that in turn will impact positively on the bottom line.
It won’t be possible or appropriate for every employer to provide financial advice to their employees, but financial education, delivered well and in consultation with employees to ensure it genuinely delivers on their requirements, can bring about meaningful and long-lasting benefits to the workforce, through enhanced engagement, boosted productivity and a visible benefit to the bottom line.
With more than one third of workers stating that stress in the workplace is down to their money troubles (ACAS 2014), surely, for those organisations with adequate resources at their disposal, financial education could make all the difference.
Read more in our White Paper ‘The changing landscape in Managing Talent'.
For further information on this subject, please speak with your Equiniti relationship manager.