- An ageing population across Europe and Asia is putting pressure on governments to honour long term commitments to their populations
- Financial worries are the largest contributor to poor mental health, something the World Health Organisation says costs the global economy $2.5 trillion per year
The OECD How’s Life report highlights:
OECD countries with higher average levels of wellbeing tend to have greater equality between population groups and fewer people living in deprivation. On the whole, people in countries traditionally associated with high wellbeing, such as Nordic countries, the Netherlands, New Zealand and Switzerland, enjoy both higher levels of current wellbeing and lower inequalities compared to other countries. Yet some of the most equal countries have experienced little change, or even widening inequalities, in the last decade. Sweden and Denmark, renowned for their high quality of life, have recently experienced rising income inequality, falls in social support and an increase in those reporting very low life satisfaction.
Household debt in almost two-thirds of the OECD exceeds annual household disposable income and has deepened in a third of member states since 2010.
OECD (2020), ‘Executive summary’, in How’s Life? 2020: Measuring Wellbeing, OECD Publishing, Paris.
The Aon EMEA Rising Resilient report interviewed individuals across the UK, Spain, Netherlands, France and Italy, and identified that financial security was fundamental to creating employee resilience. Employees want and expect their employer not only to provide a wide range of financial wellbeing benefits, but also to support the development of their financial knowledge and confidence.
In some countries, employers are embracing the need to offer this type of support as a key part of their wellbeing strategy – but this is happening far from universally. As Daniel Heimsoth, Group Lead Health Solutions at Aon Germany noted in our Rising Resilient report:
‘In Germany, it isn’t common, with the exception of pension plans, that an employer is part of the financial lives of their employees. This creates a national culture where people don’t see their employers as a source of help – but this goes against everything we know about creating wellbeing – and we see it working very well in other countries. We need to get past this barrier so German companies can begin to reap the benefits of allowing their employees to improve their wellbeing.’
Aon’s 2021 DC Pension and Financial Wellbeing Employee Research interviewed over 2000 individuals and the results show an overall lack of confidence about managing finances now, and little optimism for the future:
Global response to the issues
Aon’s 2021 Global Wellbeing Survey questioned 1,648 companies in 41 countries. It found that while 54% of employers incorporate financial wellbeing into their strategy, the impact and breadth of the financial wellbeing support offer varied and the range of support was not as comprehensive as it could be. 76% of companies have no plans to help employees with day-to-day money management and 83% have no plans to offer emergency savings.
What is Aon’s experience?
Before the coronavirus pandemic, we had seen a growing interest in providing financial wellbeing support for employees, especially amongst our global and multinational clients. These clients see financial wellbeing as an important pillar in the overall wellbeing story and are often seeking a simple, universally applicable technology-based solution.
The impact of the pandemic has increased that focus and we have seen a great increase in demand for support, often linking mental health to financial wellbeing.
The provision of services such as financial advice and financial communications differs substantially across APAC depending on local regulations.
Local cultural nuances that impact financial behaviour and decision making need to be considered; for example, use of language (eg, the use number 4 which is considered unlucky and 8 which is associated with wealth in Greater China), preferences for: property, ESG, a tradition of holding commodities like gold, or holding cash, or the need for Shariah-appropriate solutions in some markets.
Mobile-enabled young workforces across Asia typically create both challenges and opportunities for engagement. Key topics they want to consider include:
- Risk management
- Savings and investments
There are low levels of awareness around available financial solutions. The main financial goals are around home ownership, and children’s education.
Across Europe, financial wellbeing awareness, approaches and sophistication vary widely.
There are some common themes that are dictating pace of change as shown in the graphic below.
The shift from DB to DC pensions in some countries is a catalyst for emphasis on the ‘retirement planning’ part of financial wellbeing, and the introduction of auto-enrolment straight into DC pensions in countries such as Poland and Turkey put them on the very early stages of the road already trodden by the UK.
Across all areas in Europe, there is a growing recognition of issues with financial literacy, personal debt levels and feelings of financial insecurity. GDPR legislation and slow introduction of technology solutions in some areas – Germany, Switzerland, and France, for instance – are slowing down progress. In other areas such as the Nordics, employees have access to real-time pension and benefit dashboards and access to individual advice…and yet our experience tells us individuals are still approaching retirement unprepared.
Across Europe, products and services are highly regulated and there is an increasing focus on transparency of costs in investment products. Even within the region there are widely different opportunities; for example, access to Open Banking technology is widely understood and used in UK and Ireland, but only just starting to emerge across Europe.
LatAM has many of the same issues that we see globally, with economic stresses exacerbated by the coronavirus pandemic, less-developed benefits offerings and low propensity for mid- to long-term savings adding additional challenges.
- Increased life expectancies are leading to changes in retirement ages and working practices which are putting pressure on employers
- High interest rates are making it hard to pay off debts. Outstanding debts are a concern at retirement
- Retirement and other savings are insufficient as elder care and medical costs are picked up by individuals, who need to work to pay costs in retirement
- Long-/mid-term planning and insurance are not considered a priority. There is limited private health coverage available for retirees
- Governments are looking to shift healthcare, retirement and other social costs to the private sector
- Increasing awareness of the impact of stress on employee productivity, absence and engagement, and a willingness by employers to take action
What can we do – are there reasons for optimism?
Aon’s experience of delivering financial wellbeing support has established a methodology that can really make a difference.
- Create your vision and define the scope for what ‘good’ looks like
Aon believes individuals achieve financial wellbeing by having the ability to confidently manage financial life today, while preparing for the future and anything unexpected along the way.
Define a globally applicable vision of what you are trying to achieve as an organisation and the areas you will and will not cover, eg, will you offer personal advice?
2. Create a dialogue with employees about joint responsibility. Companies can provide an excellent range of benefits and employees can be supported to understand and access those benefits; ultimately employees are responsible their own financial affairs.
3. Ensure the range of support and products and services offered are created with a Diversity, Equity and Inclusion focus.
4. Set strategy and vision globally but deliver locally to ensure the regional /country differences are managed.
5. Recognise this is not a one-off exercise but needs to be a rolling programme to allow individuals to access the tools and resources they need at the right time for them.
6. Create a can-do attitude for employees; we need to offset the negative, ‘uphill struggle’ view that many employees start their financial wellbeing journey with. Our experience tells us that with the right type of support, individuals can take control of their finances, make plans for the future and feel comfortable with basic investment concepts and decision making, and when they do this they feel more positive about the future. Small steps can make a difference.
7. Use technology to personalise the experience wherever possible.
Key building blocks of a financial wellbeing programme
- Aon’s Financial Wellbeing Programme: a generic globally applicable programme. Aon’s s programme helps employees understand their attitude to money. This understanding can help them develop healthy money habits and make better decisions, and create clear action plans to follow. This programme helps answer the question Why are some people better with money, and what can we learn from them? The programme helps employees gain the emotional intelligence about money they will need to be able to benefit fully from more detailed financial education sessions. The style is relaxed and uses storytelling to help people understand their behaviour around money.
2. Locally-delivered financial wellbeing sessions. These sessions focus on the 4 Ps (Prepare, Protect, Plan, Preserve); they go into more detail and cover the basic principles of financial planning.
We use our 4ps framework to improve employee financial wellbeing by focussing on changing behaviours, establishing healthy habits and helping employees make better decisions and be more resilient
- Link the actions identified in phase 2 to the local financial wellbeing benefit offer, so actions can be taken easily and in a timely manner.
It is important to ensure that the benefit offer has the right mix and type of financial wellbeing benefits to suit the different segments of the workforce, and that it is easy to access those benefits. It is important to communicate how the benefits might be used to support specific financial challenges; using persona stories can be very helpful. Using technology to personalise the employee experience and ensure that the most relevant benefits are easy to find and understand should increase take up.
This might be summarised for employees as:
Our experience of working with employers and their employees who follow this type of approach does give us cause for optimism:
- Employees are able to understand their own behaviour around money and use that knowledge to be more confident
- Approaching the more detailed financial education sessions with confidence ensures that they get more out of them.
- Making it easy to take actions after any sessions or communications are sent is more likely to ensure action is taken straightaway not put on the ‘to do list’
- Demystifying how to achieve good financial wellbeing by using simple language, concepts and storytelling gives employees the tools and motivation they need to help themselves
To find out more about Aon’s Financial Wellbeing Programme, please get in touch.