Articles - How financial wellbeing can improve pension provision

January can be a trying time for finances - an early December pay day and Christmas excess can lead to “Blue Monday” as current accounts are depleted. London cab drivers refer to January as “Kipper Season” - perhaps a reference to just how flat trade is, as people stay at home to save money before “payday weekend” restores trade again. These ebbs and flows in spending are an indicator of how well many of us “manage” our finances.

 By Dale Critchley, Workplace Policy Manager, Aviva

 Inertia means that pension saving can often seem immune to the financial wellbeing of savers. Workplace pension saving has been maintained despite the increased cost of living, opt out rates remain consistent across the demographic of most firms, but it would be a mistake to think that pensions saving is unaffected. Too many people are saving at default levels of contributions that will struggle to provide them with the retirement income they aspire to. The challenge of persuading people to put money aside for their 60’s and 70’s when they don’t know whether they will be in the black until pay day is obvious. It’s where wellbeing programmes can make a difference.

 A programme should include signposting to credible content that covers the breadth of circumstances that employees are likely to find themselves in. Online or face to face workshops for people with similar needs might be offered, alongside education that allows employees to learn at their own pace using tools and apps designed to improve their capability and importantly how they feel about their finances. The important thing is that programmes shouldn’t be purely focused on lower paid workers as financial stress can take many forms and impact anyone.

 A major cause of stress about finances is just not feeling in control. At a simple level it’s knowing where the money is going, and that there will be money in the bank at the end of the month. Beyond that it includes an awareness of the need to have long and short-term plans in place to finance the goals we have in life, including our retirement. Those plans will be different for each employee, but the reassurance of having a plan, and the feeling of being in control is universal.

 Knowing what you want to achieve is one thing, having the capability to deliver it is another. A key deliverable for any financial wellbeing programme is to improve knowledge. That might be education around something as simple as interest rates, or tax and tax-free allowances for those for whom managing wealth, or the fear of unexpected tax bills is a cause for concern. The aim should be to improve employee confidence in their ability to make the right decisions about their finances, and move them from doing nothing, to doing what’s right for them.

 Improving knowledge might also have the effect of raising awareness about the complexity of a situation, and the need for additional guidance and advice. Financial wellbeing programmes should ideally include access to additional support, recognising that a do-it-yourself solution won’t be right for everyone.

 Improving financial resilience - the ability to withstand life events that might have a negative impact on our financial position – is also of real importance. This will include an element of savings, but it should also include the value of insurance against events that could derail our finances and life plans. The aim is to reduce the extent to which employees might be worrying about the immediate impact of the unknown, and improve confidence in longer term planning.

 Financial wellbeing programs are about improving how employees feel about their finances, reducing stress and helping people focus on what’s important to them. Pension saving will undoubtedly be a consideration for many employees, but the benefit for everyone is the potential for financial wellbeing to simply free up space to think about the future.


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