Why workplace savings can help people build financial resilience
As the cost of living bites, workers expect their employers to do more to support their financial wellbeing.
Although the rising cost of living is stretching many households’ finances, for those who are in work and do feel able to save a little, their employer may be able to help them take steps to build greater financial resilience in the future by offering a workplace savings scheme.
Research from the Building Societies Association (BSA) highlights the vulnerable financial position of many households, with more than six in ten (61%) adults who are employed finding their bills and credit commitments a burden.
Lack of financial resilience
Many households have little or no resilience should they experience a shock to their income, with one in 20 employees (5%) saying they would not be able to cover their living expenses for one week if they lost their main source of income. 15% wouldn’t be able to last a month, demonstrating the lack of financial security faced by many families.
When asked whether their employers should care about their financial wellbeing, 62% of employees thought they should, but only 24% think that their employer actually does care.
With a workplace savings scheme, an employee choosing to participate sets an amount to be deducted from their monthly salary after tax through payroll. This money is placed into a cash savings account that they can access at any time.
Whilst recognising the recent ONS survey, which reported that 43% of people will not be able to save any money in the next 12 months, introducing a workplace savings scheme for those who are in work and do feel able to save a little each month, could be one way for an employer to help their workforce to take steps to improve their longer-term individual financial wellbeing. People who are on some elements of Working Tax Credit and Universal Credit, who are able to save a little, would be better off using Help-to-Save due to the generous bonus scheme.
There is clearly an appetite for this type of employer support too, with half of employees (50%) who aren’t currently offered workplace savings interested in joining. Of those whose money worries had impacted their work, nearly two thirds (60%) said they’d be interested in a workplace savings scheme if this was offered to them.
Impact on productivity
The increased sense of financial security that a savings buffer provides has benefits for employers too. Currently more than one in four (27%) employees said that money worries have affected their ability to do their job. By helping to support financial wellbeing through workplace savings, the impact on people’s work from financial stress could reduce.
Guy Opperman, Minister for Financial Inclusion, welcomed the report, saying “Workplace savings can play an important role in helping people to build their future financial resilience. It’s good to see that many credit unions and some building societies have schemes in place for employers to support people to save direct from their salary, but we now need to grow the number of providers and encourage employers to take advantage of these services to support their staff.”
Many credit unions and some building societies offer this type of account, and several building societies are actively exploring how they can help in this area.
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