Trustees and employers must focus on financial wellbeing, experts say

A report produced by Aegon and the Centre for Economics and Business Research estimates employees are taking off around 4m days a year due to financial concerns. This is equivalent to £626m in lost output.

There needs to be a clear, informed discussion with trustees and the employer, about what the whole holistic thinking is around financial wellbeing

Damian Stancombe, Barnett Waddingham

The study of 2,000 UK employees showed that 11 per cent of workers surveyed said they have experienced a fall in productivity at some point over the past three years as a result of financial distress.

Financial strain affects productivity

This included a decreased ability to come up with new ideas, increased difficulty completing routine tasks and a deterioration in the quality of work produced.

Of those surveyed, 24 per cent said they are often distracted by money concerns at work.

The survey showed that respondents worry more about money at work than family problems and health issues.

It also found that younger workers are among the worst affected, reflecting the lower average levels of income and savings.

Pablo Shah, economist at the CEBR, said: “There does appear to be a shortfall in the provision of financial education by employers.”

While 35 per cent of respondents stated that they would benefit from financial education, just one in seven of these are currently receiving any form of financial education from their employer.

People taking time off work due to poor financial wellbeing does not just have an impact on the absent individual’s levels of productivity.

There is also “a knock-on effect throughout the teams in which these individuals work”, he said.

Employees of small companies struggle

Earlier this year, Virgin Money introduced a financial wellbeing portal to help its own workers think differently about managing their money.

However, the report suggested that smaller businesses may not have the time or resources to provide similar solutions.

Within small companies, 34 per cent of workers mostly agreed that they are just getting by financially, compared with 28 per cent in large companies.

Shah said: “There are a lot of things that small businesses can do at relatively little expense.”

For example, employers could make employees aware of the pensions advice allowance, which enables members to access up to £500 from their pot up to three times during their lifetime, he noted.

There is also a £500 tax-exempt limit on employer-funded advice for employees, which can be provided to a member of staff in a particular tax year.

Aegon has called for more to be done to increase awareness of this allowance among employers. It has also called for effective tools to help employees plan their financial future, greater support for employers to offer financial education, and a shift in mindset so financial wellbeing is viewed as of equal importance to physical and mental wellbeing.

Jon Parker, director of DC and financial wellbeing consulting at Redington, said employers could signpost their employees to a range of good, free, online material, on the Money Advice Service, for example.

“I don’t think that those two allowances are very well known yet,” Parker said. Where it is known, it has not been taken up very much yet – which may be because it is quite new, he added.

Has employer trust eroded?

Calls for improved financial wellbeing have tended to focus on the employer as a provider and trusted source.

However, Damian Stancombe, head of workplace wealth at Barnett Waddingham, argued that trust in employers has broken down over the years – perhaps as a result of higher turnover with people changing jobs more frequently and a "taboo aspect" where employees are hesitant to talk.

Better communication between pension scheme trustees and employers is therefore crucial. “There needs to be a clear, informed discussion with trustees and the employer, about what the whole holistic thinking is around financial wellbeing,” he said.

He stressed that retirement outcomes are influenced by financial matters “today and tomorrow”, rather than just at retirement date.

It is important to remember that “most of the outcome around pensions is going to be dominated by contributions [and] affordability”, Stancombe said.

Mike Crowe, trustee representative at Dalriada Trustees, said: “Employers considering the results of this analysis must surely see that the correlation between financial wellbeing and productivity makes this something that they need to consider.”

He argued that financial education needs to start before employment begins. 

“If we can equip a future workforce with basic financial knowledge, then by the time they enter employment the seeds will have been planted and we will see higher engagement in savings, whether that is through auto-enrolment take-up, higher contributions or just plain saving money,” he said.