financial wellbeing in the workplace - aegon uk · and business research report. contents key...

Financial wellbeing in the workplaceA summary of the Aegon and Centre for Economics and Business Research report

Contents

Key findings 4

How was the report was produced? 5

Measures of financial wellbeing 6

Employees’ financial wellbeing scores 8

Financial wellbeing and productivity in the workplace 10

The cost of absenteeism and presenteeism 11

Employer options to improve financial wellbeing 12

What is Aegon calling for? 13

3 Financial wellbeing report

Aegon’s interest in financial wellbeing

What do we mean by financial wellbeing?When we talk about financial wellbeing, we mean people’s control over their finances, their capacity to absorb a financial shock, their ability to meet financial goals and make choices that allow them enjoy life.

We’ve partnered with the CEBR (Centre for Economics and Business Research) to try and quantify some of the issues associated with financial wellbeing. And notably the average financial wellbeing score across a range of industries and the impact that poor financial wellbeing has on productivity.

The mental health and physical wellbeing of employees have been topics high on the agenda for many employers recently. Increasingly this is being joined by a third consideration - financial wellbeing.

This is just a summary of some of the key findings, and the full report is available at aegon.co.uk/financialwellbeing

We hope this report is a useful resource for employers and HR directors in particular. It’s intended to provide an introduction to some of the issues surrounding financial wellbeing and to provide initial thinking on the steps employers could be taking to improve wellbeing in their workforce.


Poor financial wellbeing costs UK employers £1.56bn each year through absenteeism and presenteeism

Over 500,000 private sector workers have had to take time off in the last year due to their financial wellbeing, leading to a loss of over 4.2 million days of work

Key Findings

IT and Telecomms recorded the highest financial wellbeing score. Retail recorded the lowest

Employees are looking for help when it comes to understanding their benefits

30% of employees agree they are just getting by financially

London recorded the highest financialwellbeing score, while Wales recorded the lowest


Financial wellbeing report 5

How was the report was produced?

The report uses an established method of calculating financial wellbeing, created by US Consumer Financial Protection Bureau as its basis. 2,000 employees were surveyed by YouGov and their responses to four categories of questions were then compiled by CEBR to calculate an average score out of a hundred.

The four areas that create a financial wellbeing score:

Long term goals

Day to dayOne off

Lifetime goals

Capacity to absorb a financial shock.

Control over finances, including being able to pay bills on time and making ends meet.

Being on track to meet financial goals, including paying off outstanding

debt and saving for retirement.

Ability to make choices, to enjoy life.


Measures of financial wellbeing

The report found that large portions of the workforce live with significant money worries, with many people unable to manage an unexpected expense or worried about their savings. But the results weren’t all doom and gloom with more people disagreeing than agreeing with the idea that they were ‘just getting by financially’.

of employees surveyed largely agree they are just‘getting by’ financially.

do not think that they are in a position to handle a major unexpected expense financially.

30%

of employees are concerned that the money they have now or will save will not last throughout retirement.

41%

of employees usually have money left over at the end of the month, while nearly a third (31%) feel that their finances often or always control their life.

Many employees have significant financial concerns

Survey respondents’ opinions on the state of their personal finances

I am doing everything to secure my financial future

I am concerned that the money I have now or will save won’t last

I feel like I will never have all the things I

want in life

I could financially handle a major unexpected

expense

I am just getting by financially

I can enjoy life because of the way I’m managing my money

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

0

Agree

Disagree

36%

43%2035

40% of under 35 year olds don’t feel that they could handle an unexpected major expense, compared to 30% of those aged 55 or above.

Generational divide in financial wellbeing

Employees of all age groups were aware of a generational divide in financial wellbeing. 33% of respondents expressed concern over the financial wellbeing of those younger than them, compared to 26% who were concerned about the financial wellbeing of others of a similar age and just 13% who were concerned about the finances of those older than them.

Over 55

Under 3540%

30%

Financial worries are partly seasonal

A further 12% of workers feel under more financial pressure than usual between June and August, which is likely related to childcare and travel expenses during the school summer holidays.

Two in five (39%) workers said they feel under more financial pressure than usual in November and December, while a quarter (24%) feel their finances are stretched more than usual in January and February.

Causes of low financial wellbeing


See page 12 for more information on what this means for employers.

Low pay / insufficient pay rises

56%

High cost of living (excluding rent and house prices)

50%

Insufficient pension provision

37%

Social pressure to spend / lead a certain lifestyle

34%

High house prices56%

Lack of understanding about managing money / budgeting

37%

Low interest rates make saving less rewarding

34%

High rental costs48%

Hospitality and leisure

Employees’ financial wellbeing scores

The financial wellbeing scores are based on CEBR’s analysis of individual’s responses to the survey and have been modelled to enable us to compare the scores of different groups. The scores range from 27 to 73 on a scale of 0 to 100. Everyone surveyed was in employment which explains why the lowest score is well above 0 and nobody scored above 73. This is because even as income or wealth levels increase, individuals will often struggle with additional living costs and financial obligations.

Financial wellbeing scores

45

46

47

48

49

50

51

52

53

50Scotland

51North East

50North West

50West Midlands

51East of England

52London

50South East51

South West

49Wales

50Yorkshire and the Humber

49East Midlands

50Average financial

wellbeing score

48Average lowest regional score

recorded in Wales52

Average highest regional score

recorded in London



Hospitality and leisure

Key financial wellbeing score data

Average financial wellbeing scores and median wages by industry £40k

Retail

£35k

£30k

£25k

£20k

£15k

£10k

£5k

£

53

52

51

50

49

48

47

46

Hospita

lity

and l

eisur

e Other

Medica

l and

health

serv

ices Le

gal

Media/

mar

ketin

g/

adve

rtisin

g/ P

R & sa

les

Constru

ction

Tran

sporta

tion

& dist

ribut

ion

Finan

ce an

d

Accoun

ting

Manuf

actu

ring

IT and t

eleco

ms

Financial wellbeing scores by share of respondents

Average financial wellbeing score by age

Under 35 35-44 45-54 55+

Industry median wage

Average financial wellbeing score

1%

2%

3%

4%

5%

6%

7%

8%

4938 4027 4129 4231 4432 4534 4635 4737 7159 6050 6251 6352 6554 6655 6856 6958 73

Bottom quartile (up to 44) Top quartile (56 and above)

49 50 50 52

The analysis looked the impact that low financial wellbeing has on employee productivity. It did this in two ways, by looking at absenteeism - the direct impact of people missing work due to financial worries, and secondly by reviewing presenteeism - the amount of time lost by people worrying about money while at work.

Financial wellbeing and productivity in the workplace


is the estimated cost of low financial wellbeing as a result of absenteeism and presenteeism. Presenteeism accounts for £0.9bn of the cost to business, and absenteeism accounts for £0.6bn.

£1.56 billion

The cost of presenteeism

employees throughout the private sector have experienced a fall in productivity over the last three years, as a result of financial concerns.

2.4 millionaged 55 and over have taken time off due to money worries. This figure rises to 16% for under 35 year olds.

6%

is the cost 36% of workers reported experiencing a fall in productivity as a result of difficulties with their financial situation. Meanwhile, 30% felt this cost them between one and two hours.

1 hourhave experienced a time in the past three years where there has been a decline in their personal productivity at work due to problems related to their financial situation.

11%

While absenteeism is clearly a major concern for employers, another even more widespread issue is presenteeism - where employees attend work but operate with lower productivity due to the distraction of money worries.

The cost of absenteeism Occasional absences from work are inevitable - it’s the habitual absences that are most challenging to employers. Not only does it have a negative effect on colleagues, missed work days have a profound financial effect on a company’s bottom line.

is the average employee score. Those who have noticed a drop in productivity scored only 43. Similarly, those who missed days at work had an average score of 43.

50 private sector workers have had to take time off in the last year due their financial wellbeing, leading to a loss of over 4.2 million days of work.

500,000

is the average cost to employers for each day lost due to financial distress. Combining this figure with the 4.2 million lost days of work yields a cost to employers of £626 million each year as a result of employees taking time-off due to their financial situation.

£150 of those who had taken time off reported an annual pre-tax income below £25,000. The majority of workers in our survey who have taken time off in the last year as a result of financial concerns are at the lower end of the income spectrum.

73%

of workers in our survey said that they had taken time off from work at least partly because of problems with their financial situation. Among these workers, an average of 8.1 days were lost over the last year as a result of their financial situation.

2%


What is Aegon calling for?

At Aegon, we want to work with employers to support them, their advisers and ultimately their employees.Over one in five employees said that their employer doesn’t provide information on how to make the most of the benefits on offer, but that they would like their employer to do so. This is an area where employers have significant scope to improve at relatively little expense - by merely communicating the various benefits that are already on offer.

Our research shows that those employees who have access to financial education through their employer show higher financial well-being scores than those who don’t.

With issues like high property prices and savings insecurity commonly cited as a source of low financial wellbeing, it was interesting to find that only 5% of employees are being offered support in saving and investment, compared to 67% who feel that this would be beneficial to their financial wellbeing.


Employer options to improve financial wellbeing

said their employer offered face-to-face counselling and advice by specialised staff or external consultants to address specific questions.

7%

said their employer does not provide information on how to make the most of the benefits on offer, but that they would like their employer to do so.

21%

Communicate with employees about the range of benefits on offer, in a way that is clear and that they understand.

in finance and accounting are being offered financial education by their employer, compared to just 8% in retail and construction sectors. Furthermore, the industries that are currently coming up short when it comes to financial education are also those with the lowest financial wellbeing scores.

33%

are receiving financial education from their employer. While 35% of survey respondents feel that they would benefit from it.

1 in 7

Offer greater access to financial education for employees.

are offered support with their finances in particular saving and investment - with issues like high house prices and savings insecurity commonly cited as a source of low financial wellbeing, 67% feel that support would be beneficial to their financial wellbeing.

5%

Equip employees with tools to help them with financial future forecasting, including access to guidance on saving and investment.

For more information and to read the full report, visit Aegon’s financial wellbeing page at aegon.co.uk/financialwellbeingThe website includes a range of helpful resources to encourage wider engagement with financial wellbeing, as well as further research.


Aegon is a brand name of Scottish Equitable plc (No. SC144517) and Aegon Investment Solutions Ltd (No. SC394519) registered in Scotland, registered office: Edinburgh Park, Edinburgh EH12 9SE. Both are Aegon companies. Scottish Equitable plc is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Aegon Investment Solutions Ltd is authorised and regulated by the Financial Conduct Authority. Their Financial Services Register numbers are 165548 and 543123 respectively. © 2018 Aegon UK plcCORP382251

aegon.co.uk @aegonuk Aegon UK Aegon UK

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