3rd February 2016
Nearly three-quarters of UK employees believe they will be worse off in retirement than their parents’ generation, new figures show.
The study by professional services firm, Willis Towers Watson found that while 60% of people in their 50s are unworried about their immediate or long-term finances, employees in their 30s are the most likely to be worried about both, with 1-in-5 (20%) seen as ‘struggling’.
The 2015 Global Benefits Attitudes Survey of over 30,000 employees in 19 countries found that the average age at which UK employees predict they will retire is just over 65 years old.
Despite this, many were pessimistic about how long their retirement savings will last. 39% think their money will run out 15 years into retirement, while over half (55%) think it will be gone within 25 years.
Minh Tran, senior consultant at Willis Towers Watson, says: “Employees overwhelmingly anticipate less wealth in their retirement, compared to their parents’ generation. Younger employees are particularly concerned about their financial situation. The immediate financial priorities facing employees in their 20s and 30s – including student debt, housing deposits and childcare costs – can make it difficult to prioritise long-term issues such as retirement savings.”
Despite concerns about current and future finances, the research found that financial satisfaction has actually increased in the last two years. In 2015, the economy had seemingly recovered from the depths of the recession with higher wages and low inflation boosting financial security.
As a result, over half (52%) of UK employees were satisfied with their financial situation at that time, significantly higher than the 42% who answered positively in 2013.
For those with financial concerns, the impact can be damaging. 1-in-5 people (20%) claim they have financial worries that are negatively affecting their life, 1-in-4 (25%) are often worried about their level of debt and over 1-in-3 (37%) are often worried about their current financial state.
The research shows that financial anxiety can have an impact on people’s ability to perform at work, with 39% of people who are struggling with their finances admitting that it stops them doing their best at work. In addition, higher levels of absenteeism can occur in employees with financial concerns.
The report found that people who are unworried about their finances reported they took an average of three absence days from work per year, whereas employees who are struggling financially are absent for an average of seven days per year.
Tran says: “Our survey shows that financial worries can have a negative impact on employees’ personal and work life, and inevitably affect productivity, employee engagement and satisfaction. Employers can help their employees by offering flexibility and personal choice when it comes to tackling individual financial anxieties and priorities.
“To put this into context, we are already seeing examples of companies that offer generous pension contributions giving employees more choice over how they allocate those funds across a number of different savings vehicles – such as ISAs and corporate savings plans. The aim is to help employees with their short and medium term financial goals, as well as more established long-term retirement savings. This shift by employers from a focus on ‘retirement savings’ to help with ‘wealth creation’ can lead to greater employee satisfaction and engagement with their benefits plan.”