Over four in five UK firms now place a high priority on improving employee financial wellbeing support over the next two years through improved communication and education, according to WTW.
According to WTW’s 2022 Defined Contribution and Savings Survey, 82 per cent are also focused on improving employees’ experiences with their DC savings plan through better communication and technology.
The study reveals that as a result of this shift, the number of organisations with formal financial wellbeing strategies in place, connected programmes, a consistent brand, and an effective communication strategy is expected to dramatically increase from 17 per cent to 94 per cent within the next two years.
Most financial wellbeing programmes prioritise saving for retirement. Still, many also aim to address other issues like budgeting, spending, debt, short-term emergency savings and preparing for down payments on homes.
Nearly a quarter or 22 per cent of firms aim to add this flexibility in the next two years. A small percentage of employers, 11 per cent, even permit employees to use workplace pension contributions for other financial needs.
WTW retirement business director Gemma Burrows: “In recent years we have seen employers take a much broader view of their employee experience and financial wellbeing strategy. 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.
“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 study also found that since last year, the number of FTSE 350 DC plans that have ESG considerations in their default investing funds has doubled. More than four out of ten or 43 per cent DC schemes currently include ESG investment considerations in their defaults, compared to 30 percent last year and 17 percent in 2020. With 56 percent of DC schemes planning to adopt ESG over the next two years, this number is expected to rise.
With two-thirds or 66 per cent of master trusts now including ESG elements into their default funds and that number expected to rise to four-in-five or 80 per cent within two years, master trusts are leading the way in ESG.
Burrows says: “ESG continues to gain significant focus across all DC scheme types and within two years it is expected that more than half of schemes will have taken the step of integrating ESG into the default strategy. As well as aligning with corporate beliefs for many companies, ESG is also being seen as an important factor in engaging members in their retirement savings.”
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