Employers focus in on financial wellbeing support amid cost-of-living crisis

An increasing number of employers are looking to support employee financial wellbeing amid the cost-of-living crisis, with around 83 per cent of employers highlighting financial wellbeing support as a major focus for the next two years in research from WTW.

WTW's 2022 DC and Savings Survey also found that a further 82 per cent are focused on enhancing employees’ experience of their defined contribution (DC) savings plan.

As part of this, the number of organisations with a formal financial wellbeing strategy in place, connected programmes, and an effective communication strategy, is expected to rise from 17 per cent today to around 94 per cent within the next two years.

Retirement savings are expected to be the main priority for most (82 per cent) financial wellbeing strategies, although 48 per cent expected to address areas such as budgeting, spending and debt, while 29 per cent focus on short-term emergency savings.

The survey also found that a small proportion (11 per cent) of employers are allowing employees to use use their employer pension contributions for other financial priorities, with a further 22 per cent planning to introduce this flexibility in the next two years.

Commenting on the findings, WTW director, Gemma Burrows, explained that employers have been taking a "much broader view" of their employee experience and financial wellbeing strategy in recent years.

“Employers are acutely aware of the current cost-of-living crisis facing employees and many are adapting the way in which they offer benefits to introduce new flexibilities in order to address this," she continued.

“Contribution flexibility was once viewed solely as a mechanism to mitigate the impact of the Annual Allowance for higher earners but increasingly employers are looking at providing flexibility to employees and offering saving options, such as ISAs, that may be more relevant to individuals in the short and medium term.”

The survey also revealed that the number of FTSE 350 DC schemes that have incorporated environmental, social and governance (ESG) factors into their default investment funds has increased by half again since last year.

According to the survey, around 43 per cent of DC schemes have now adopted ESG-investing factors into their default, up from 30 per cent last year, with this expected to increase to 56 per cent in the next two years.

Master trusts were leading the way on ESG issues, with two-thirds (66 per cent) having already incorporated ESG factors into their default funds, a figure set to increase to 80 per cent within two years.

There was also an increasing focus on the oversight of schemes run through outsourced pension providers, as over three quarters (78 per cent) of employers with such schemes have put in place a voluntary DC Governance Committee, while a further 8 per cent plan to establish one in the next two years.

Member engagement and value for members were highlighted as two of the highest priorities for these committees, with nearly two-thirds (62 per cent) having undertaken a review of the scheme’s performance against objective, while over half (56 per cent) have assessed value for money for members.

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