Virus underlines importance of financial wellness

U.K. retirement plan sponsors have rolled out a variety of financial wellness tools in the past few years, but the coronavirus pandemic is adding new urgency to their efforts as well as new tools.

Sources said some plan sponsors are adopting traditional financial wellness offerings such as debt consolidation programs, short-term loans or budget planners. New additions include webinars and toolkits aimed at helping employees cope with debt and mortgage payments as well as manage their retirement savings as the pandemic goes on. All of these efforts are seen as ways to help employees build resiliency, reduce stress and, hopefully, increase productivity at work when money worries are curbed.

The coronavirus pandemic has intensified the need to help people navigate financial stress and manage household savings, save for the short term and pay down debt, said Craig Rimmer, policy lead for master trusts at the U.K. Pensions and Lifetime Savings Association in London.

"It's to do with people being more aware and how (their) household resilience could be affected by a black swan event like the pandemic. It has helped to galvanize people's focus on that," he said.

Research developed for financial wellness platform and workplace plan provider Cushon Money Ltd. in May showed that out of 1,000 corporate human resources leaders surveyed, 83.9% said the COVID-19 pandemic has shown how important financial resilience is and that employers should be helping employees to build up savings. Almost 78% of 2,000 surveyed employees agreed that the COVID-19 crisis has made them realize that having savings to fall back on is important, according to the same research.

Historically, employees have shown little willingness to engage with financial wellness programs offered by their employers, consultants said. Sources said that U.K. plan sponsors have had a hard time striking a balance between communicating that the programs are available and making sure they aren't seen as steering people into programs.

In the past, the takeup of financial wellness tools has been poor due to a lack of quality education and promotion from plan sponsors, said Darren Laverty, financial well-being strategist and employee benefits consultant at employee benefit consulting firm Secondsight U.K. Ltd. For example, he said he knew of one company that offered its 1,200 employees a loan consolidation tool, but only five consolidation loans were taken out.

The PLSA's Mr. Rimmer added that plan sponsors haven't been confident about facilitating short-term loans from outside lenders because they lacked clarity around their role in promoting the availability of such loans. Following the outbreak of the pandemic, the PLSA is aiming to clarify what constitutes acceptable guidance by the end of the first quarter, he added.

The COVID-19 pandemic, however, has shown plan sponsors that employees need better educational resources to help them to think about their finances holistically. As many employees switched to working from home, employers saw a greater demand for virtual interaction and an uptick in participants' requests and questions. And these plan sponsors turned to improving their messaging around financial wellness.

Robert Cochran, senior corporate pension specialist at Scottish Widows, which has £140 billion ($191.5 billion) in assets under management, said: "The pandemic has encouraged us to do things a little bit differently. At the start of the pandemic, we identified that people started to do things that were not helpful to their financial well-being ... such as people who were in lifestyle funds trying to switch them to cash."

Scottish Widows set up a COVID-19 hub for employees and a separate one for employers to answer questions that they had about their finances during the pandemic.

"We had a number of colleagues record videos answering those questions and we pushed them out using social channels," Mr. Cochran said, adding that 10 different videos addressing issues, such as switching funds in the pandemic were published. Some of these videos recorded 300,000 views in just over a month, he said. And another group of 1,000 executives from participating sponsors watched a coronavirus-themed webinar.

"We also created a redundancy hub for (manufacturers) that have had to close down plants. That's completely new content that we have created as a result of employer demand," he said. Within the hub, people can find information on improving digital skills, for example, job searching online, as well as tips on managing debt.

Also, the £36.1 billion Pension Protection Fund, London, alongside a group of regulators developed a new guide in June to help retirees make better decisions during the pandemic.

The guide alerts plan participants about the danger of fraud and the consequences of taking their retirement savings out to prevent further losses during market volatility. The guide also helps plan participants connect with independent organizations to verify the information they are receiving from a provider to ensure it's not a scam. The COVID-19 guide has received a regular flow of web traffic since it was published on the PPF's website and has reached more than 375,000 people, a spokeswoman said.

Mercer Consulting Ltd.'s COVID-19 response aimed to help clients — both companies and individuals — via online resources.

The toolkit, which the consultant launched in April, provides employees with practical information on different areas in personal finance, including managing budgets, debt or mortgage payments in a "simple and concise way," said Jeremy Milton, principal defined contribution and financial wellness in Bristol, England. About 4,000 visitors accessed the Mercer Employer Resource between April and December, he added.

It's that type of proactive approach that's intensified throughout the pandemic, he said.

During the pandemic some companies that didn't traditionally facilitate access to short-term hardship loans from third-party firms added that to their suite of financial wellness tools, he said. Such loans don't get rid of a participant's debt problem, he said. But plan participants can get a better rate on repayments even with an average credit score, he added, because the loan is deducted and repaid from the sponsor's payroll — a practice seen as lessening the risk that the loan won't be repaid. Also, harnessing the economies of scale presented by a sponsor's plan also helps ensure a better interest rate than individuals could secure on their own.

But it's not just only about financial wellness. Plan sponsors want to help participants in other areas of their lives. For example, in lockdown Merchant Navy Officers Pension Fund, Surrey, England, introduced webinars over 13 weeks — run by Wellbeing People Ltd. — aimed at helping participants to manage their health and well-being in the pandemic, including dealing with lack of movement and lack of sleep as well as managing nutrition and mastering time.

"The response was phenomenal," said Rory Murphy, chairman of the £1 billion ($1.4 billion) pension fund. "People have said it was an absolute lifeline for them in terms of having coping mechanisms," he added.

Mr. Murphy added that out of 24,000 participants in the fund, 400 people attended a webinar every single week at any given point. Mr. Murphy added: "It has indicated there are more things that we can do," such as potentially negotiating better rates on car or life insurance on behalf of participants.