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How to help your employees avoid 4 big financial regrets

Getting to grips with money at the earliest opportunity is key, and the workplace offers a perfect opportunity to nudge people into making better choices. Alastair Stuart-Hunt explains how.

Important notes

This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in. These articles are intended for employers and HR professionals, not for individual investors.

The pandemic has affected us all financially in different ways and has forced many to focus our attention on our spending habits. For some, the extra time and space to consider our financial position has been welcomed but for others, money matters are a pandora’s box that we’d rather keep a lid on.

Surprisingly, data from the Office for National Statistics and The Bank of England suggests that over the last 12 months some good financial habits have started to be formed, so why not consider how you can help your employees emerge from the pandemic financially fitter than when they went in a year ago.

A survey of 2,000 respondents that Hargreaves Lansdown ran in February, revealed the 4 biggest things that we regret putting off until later in life, but imagine if your older self could go back in time and give your younger self a bit of sage financial guidance that would make a world of difference in your older years.

Getting to grips with money at the earliest opportunity is key, and the workplace offers a perfect opportunity to nudge people into making better choices, offering clear and trusted information to help empower your employees. With that in mind, we examine the top 4 financial regrets from this survey and what employers can do to help employees avoid them:

1. Not saving for a rainy day

The pandemic has shaken household finances perhaps more than any other event in recent memory. Reduced incomes and lost jobs have impacted many households and fears around job security are pervasive. And with a third of adults having less than £600 saved for an emergency, the nation’s financial resilience has been tested and found wanting.

Employers should consider implementing a payroll savings scheme alongside their pension that can help employees quickly build up a rainy-day fund. Most experts suggest between 3-6 months’ worth of expenditure as a rule of thumb and once reached, that cash buffer not only increases overall financial resilience but lowers levels of financial anxiety.

2. Not saving enough for retirement

Automatic enrolment was the cure for low pension take-up in the UK and has undoubtedly been successful in increasing the overall number of pension savers. However, the truth is that for many, retirement will be a pretty hard landing. Many employees stick to paying minimum contributions and are under the illusion that because they have been enrolled, they will be ok in retirement. However, more than half of pension savers are unlikely to reach the Pension Commission’s retirement income target of £19,162 with these minimum levels of contributions (based on data from 2017, for a median earner). Those over age 55 are the most likely to regret not starting a pension sooner, because they’re beginning to realise how their lack of pension saving will impact their quality of life in retirement.

The biggest mystery in pensions is knowing the relationship between what you put in and what you get out at retirement. Without this, pension savers are effectively shooting in the dark.

Helping employees understand how much they should be saving should be a core part of your pension offering and can be achieved with clear jargon-free information, online calculators, presentations, webinars, videos or even better, an individual 1-2-1 meeting to help them make their own informed decisions. A workplace pension is a core company benefit but seldom appreciated enough. Understanding is what unlocks appreciation and turns a business cost into a benefit which will help you recruit, retain and reward your staff.

Our Youtube channel has a host of video resources for employees:

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3. Not starting to invest sooner

Investing in the stock market can seem pretty daunting but the truth is that anyone with a pension is already a stock market investor. Investing in the stock market is considered one of the best ways to grow your money over the long term, so why keep it just to your pension? Employers should help get employees' money working harder to reach other long-term goals and contrary to popular belief, you don’t have to start with a huge sum to invest.

Helping employees understand the basics of investing is the key that unlocks further medium to long-term savings opportunities, be it for a house deposit, university fees or just because it’s a prudent thing to do. Providing a Workplace Stocks and Shares ISA, backed up with guidance and support, offers savings flexibility, tax efficiency, promotes better savings habits and instils greater financial confidence among members.

4. Not getting to grips with debt

Among those aged between 35 and 54, one in five wish they’d got to grips with debt earlier in life. At a time when they have so many demands on their money, they regret having to repay old debts at the same time. The average credit card debt per household in December 2020 was £2,094 (£1,101 per adult), and on average interest rates would take nearly 25 years to clear based on minimum monthly repayments. Debt is a topic that is seldom tackled in the workplace yet affects nearly all of us. Many employers do little more than direct employees to their Employee Assistance Programme (EAP) or Citizens Advice Bureau for help, but these are often perceived as the last resort when things have got critical rather than a source of information to build positive financial behaviour.

One surprise result of the pandemic is that it has brought about a massive shift in spending habits, with record amounts of personal and credit card debt paid off in the first half of 2020 because we could not spend money as readily during the lockdown. The savings ratio, which records the proportion of household income that is saved into bank accounts, jumped from around 8% to an unprecedented 25% during the first lockdown. These are positive financial habits that employers should try to harness and nurture. Employers should consider debt management as a core part of their financial education strategy and do all they can to de-stigmatise this crucial area. Seminars and videos are very effective to start the conversation as well as openness from senior leaders about their own money worries.

The long-term benefits are not just for the employee; lost productivity, increased absence and high employee turnover are all associated with financial stress and costs UK employers around £14.2bn each year. Helping your employees build a healthy relationship with money directly contributes to their personal wellbeing.

We’ve all had to adapt to different ways of working during the pandemic, and as one professor at King’s College London said “Coronavirus has brought forward two years of technological change in two weeks.”

This crisis has undoubtedly presented us with new challenges, but with it have come new opportunities, new ways of connecting with colleagues and new ways of re-engaging with our finances. With online solutions having their heyday, it’s now easier than ever to access financial guidance and build financial resilience among your staff. The pandemic has made remote learning almost second-nature and in many cases offers greater reach.

Over the last 12 months, we’ve run 460 webinars to over 15,000 attendees. The use of online technology such as Microsoft Teams and Zoom has resulted in content reaching far more employees than normal and for those unable to attend live, they can watch back on recordings in their own time.

And while webinars are great for getting key messages across to large audiences, we know that our members really value the ability to talk to someone directly about their own circumstances. So, when you’re considering your wellbeing strategy, be mindful not to rely solely on digital-only solutions; we’ve found that personal support is the most valued aspect of our proposition.

Find out more about how you can help your employees take back control:

Our guide to financial education

More articles

Important notes

This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in. These articles are intended for employers and HR professionals, not for individual investors.

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