The UK’s employees are more financially stressed than their global counterparts as they struggle to reconcile worries about their long-term health with their personal responsibility to fund a longer retirement.
Our new research of financial health in 12 countries worldwide found 60% of employees in the UK are stressed by their financial situation – 18% of them seriously so – placing Britain above the global average.
Respondents to our survey identified three top causes of financial stress: 36% blame general economic conditions, 35% say personal health while the same number attributed worries to not saving enough for retirement.
Women are more financially stressed than men, most notably when it comes to saving enough for retirement, largely because of a 40% pensions gap. Forty per cent of women identified this as a cause of stress compared to 30% of men.
Is It Time to Retire Retirement?
Increases in life expectancy help explain the relevance of poor health and inadequate retirement savings as contributors to financial stress. Traditional models of studying, working and then retiring look increasingly outdated as people live longer and take greater responsibility for long-term saving.
Almost two-thirds of respondents to the survey say they expect to keep working when they retire, with 7% believing they will never give up work. More than two-fifths (44%) say they will keep working in retirement but at a slower pace.
Clearly employee’s health is crucial to their ability to use work – either full or part time – as a means of funding retirement.
Four-fifths of respondents expect to live past age 80, yet only just over two-fifths (43%) say their health is good enough to carry on doing their job with just one-fifth believing they can work for as long as they choose.
Only 21% of respondents are confident they can save enough to pay for their own retirement, while the same percentage believe they will be able to cover healthcare costs.
Is it up to the individual?
The level of stress felt by individuals is exacerbated by their acceptance of responsibility for providing for retirement. Nearly nine out of ten (87%) of respondents say the buck stops with them when it comes for covering the basic necessities in later life. Twenty-nine per cent say government is responsible, and just 11% believe it is an employer or pension fund.
Although people accept personal responsibility, the survey revealed a relatively low number of people have taken control of their financial savings. Just over half (56%) had invested in a retirement scheme of some sort, while 45% say they have not calculated how much they will need in retirement. Nearly nine out of ten (87%) have not consulted with a financial adviser.
Financial stress and the individual’s inability to take control of the situation present both challenges and opportunities for employers.
In the Employer’s Interest
It is therefore in the employers’ interests to work with employees to reduce financial stress. Employers responding to the survey identified several business benefits from improving an employee’s financial security.
Fifty-eight percent acknowledge that employees would be less stressed over financial matters at work, which relates to the 46% that would expect an improvement in productivity.
Fifty-seven per cent of businesses believe employees would have a higher level of trust in the employer while 52% expected greater levels of job satisfaction.
The employer expectations from improving the workforce’s financial security aligned with employees’ views.
More than four-fifths (82%) of respondents say that improved benefits or added access to a pension would have a positive impact. More than a third (36%) said they would be more satisfied in their job; 29% would be more committed to the organisation; and 28% would spend less time worrying about money at work.
The employer is also uniquely placed to make a real difference to their employees’ finances. More than eight out of 10 employees (82%) trust their employer to provide financial advice, which contrasts to less than half (49%) of individuals who trust a financial adviser.
At the same time, employers may be able to use economies of scale to secure better rates on financial advice and financial education services, which could help to improve employees’ financial health. They may also be able to help their employees by providing a short list of providers or even products, such as loans, that could help employees manage their debt.
Improving an employee’s financial situation not only benefits their work but gives them a better chance of being able to afford to retire. This is important for businesses where the work is labour intensive, meaning employees may be less productive as they get older.
However, the idea that older employees are a burden is a thing of the past for many industries.
Employers can also benefit from tapping into the experienced workforce, encouraging employees to stay on as part of a gradual move into retirement. This presents a win/win situation for both parties with employees benefiting from an ongoing salary while the employer retains highly skilled and experienced personnel.
The traditional lifestyle model of study, work, retire is quickly becoming a thing of the past. Employees continue to face new financial challenges throughout their lives - paying off debt; short and long-term savings; paying for one-off events - and we challenge you as an employer to ask yourself, what is my obligation to support this?
Supporting employees with financial matters has benefits for both the individual and the business. Employees who are in control of their finances are less stressed and more productive. Employers that assist employees in taking control can expect greater loyalty, lower staff turnover and improved productivity.
The question then is not whether employers can afford to help their staff to take control of financial matters, but whether they can afford not to.
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Disclaimer: This article does not contain advice in respect of actions you should take. No decision should be made based on this information without obtaining prior specific, professional advice relating to your own circumstances.
Issued in the United Kingdom by Mercer Limited, which is authorised and regulated by the Financial Conduct Authority. Registered in England No. 984275. Registered Office: 1 Tower Place West, Tower Place, London, EC3R 5BU.
We invite you to contact us for more detail about how a Financial Wellness programme could help you to grow your business.