Tony Pugh, Head of DC Solutions, at Aon, looks at the tools available to help pension scheme members manage their finances
We all acquire a patchwork quilt of different bank accounts, personal savings funds, loans, pensions, and other financial products. Each of these plays an important part in our overall financial wellbeing, from building a financial safety net that supports day-to-day financial resilience, to buying a house and saving for a comfortable standard of living in retirement.
But as time goes on it can become difficult to keep track of all the different components of our financial lives. Pensions and wider financial statements get permanently consigned to a ‘read later’ pile and the realities of raising families, working long hours and other priorities overtake our good intentions to remain in control of our money.
Thankfully, there is plenty that employers and pension schemes can do to help. To really get to grips with financial wellbeing, employees and scheme members need a coherent way of seeing savings, debt, spending and other key financial information all together in one place. This helps everyone to understand what their overall ‘wealth’ looks like and whether they are on track to achieve their financial goals - including their retirement aspirations. It can also help pension scheme members to continue to save, even if during difficult times that is at a reduced rate.
Traditionally, this joined-up view of an individual’s finances has been hard to achieve, which goes some of the way to explaining why the Confederation of British Industry discovered 80 per cent of employees do not know if they are saving enough for retirement.1
But saving for retirement will be far from the only money worry that employees have at present. The rise in the cost-of-living is testing many people’s financial resilience both in terms of short-term needs and long-term planning such as pensions. Research from MoneyHub showed that for users of their technology who are paying a mortgage, non-discretionary spending was up 13 per cent (£315) per month and money available for saving was down 35 per cent (-£238) between June 2022 and June 2023.
For businesses, employees’ money worries can have wider implications, such as lower productivity, increased risk of stress-related illnesses and absenteeism/presenteeism. Even before the current economic situation, 69 per cent of UK employers said that when employees are under financial pressure, their performance at work suffers2. The Centre for Economic and Business Research put that at 4.2 million lost worker days a year, costing UK business £626 million in lost output.3
A joined-up approach
Employees’ immediate priorities in weathering cost-of-living increases, their longer-term need for financial resilience and their ongoing retirement planning, should all be part of a single, coherent, approach to financial wellbeing.
People need convenient ways to manage all their money across bank accounts, credit cards, loans, mortgages, savings, pensions, investments and more. But, as we have seen, often they cannot even see the full extent of their day-to-day financial activity, let alone plan meaningfully for the future.
Managing money and planning for retirement, needs to become much more straightforward. Technology is creating new ways to help, with ‘open’ banking able to bring data from multiple accounts and sources together and then display it in ways that are easy to understand and genuinely useful to employees and pension scheme members.
Apps such as Aon’s Well One Money are readily available to enable people to aggregate all their finances, plan confidently for the future and to manage their daily spending. Features such as day-to-day spending analysis, financial forecasting and personalised nudges help put employees in control of their money and make it easier for them to keep track of their retirement savings.
From an employer and pension scheme perspective, Well One Money offers anonymised insights into the financial habits, needs and behaviours of employees that can help businesses better support them, both through current times and in the longer term. This could include identifying early drop-offs in pension savings rates and using this as the starting point for a communications campaign.
Well One Money also includes integration with Aon’s ‘Discounts & Recognition’ service, which provides a new approach to retail discounts and shows employees how much they could save by using the programme at the shops they frequently use. That not only helps to ease cost of living worries today, but could also, in time, help employees to build up emergency savings or reach their retirement aspirations by putting more money into pensions.
In the short term, helping employees to a better understanding of their financial situation, finding new approaches to budgeting and protecting themselves against future money shocks, means that they will be in a better place to build towards longer-term goals such as retirement savings. By using technology to support this, employers have the added benefit of being able to gain a clearer understanding of their workforce’s financial behaviours and of helping them to achieve those goals.
Members of The Aon MasterTrust and BigBlue Touch (group personal pension) have automatic access to Well One Money and other DC clients can access it on an individual basis.
For more information email [email protected].
Tony Pugh
Head of DC Solutions, EMEA, Aon
Sources
1 https://www.cbi.org.uk/media/3053/futuresavings.pdf
2 Neyber, 2018 The DNA of Financial Wellbeing 2018
3 Centre for Economics and Business Research, 2018 Financial wellbeing and productivity: A study into the financial wellbeing of UK employees and its impact on productivity
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