JOHANNESBURG - The Alexander Forbes Member Watch Survey shows that the average pensioner will be able to replace only 28% of his or her income in retirement. The latest statistics on credit indicate that two out of five credit-active South Africans have impaired credit records. There are many other statistics that point to the fact that a large number of South Africans are under financial pressure.
Our research has found that, on average, employees are spending 13 hours a month (and, in some cases, more than 20 hours a month) worrying about their finances. The issues that concern individuals differ according to income, gender, age and family circumstances. The major issue is the ability to make ends meet.
These issues also affect how much individuals save and whether they preserve their savings on changing jobs. They also have a major impact on healthcare usage, which is one of the key contributors to the increasing cost of health care.
Low financial well-being ultimately has an impact on the employer’s balance sheet because financial stress leads to increased absenteeism, poor work performance, a lack of concentration, increased safety hazards and increased fraud. According to Alexander Forbes, employers, therefore, have a vested interest in improving the financial well-being of their employees. This is not for altruistic reasons but because it makes good business sense.
As things stand, the financial sector separates debt management from wealth creation. Other areas of the financial continuum are also treated in silos. For example, health care is done separately from retirement funding. Yet all these issues are interconnected, each having a knock-on effect on the other. For example, if an employee is over-indebted, this will affect how much he or she saves towards his retirement, whether or not he or she preserves those savings on changing jobs, his or her health, and how much he or she claims from his or her medical scheme. It will also affect how much time he or she spends at work worrying about all these issues which, in turn, will affect his or her performance.
Employers have tried numerous variations on financial wellness programmes – often to little avail. These programmes have not worked because they did not go to the heart of the problem. Often, they treated the symptoms and not the causes, and used interventions that were not likely to work. The approach taken to date focused on getting employees out of a crisis or removing enough stress, rather than keeping employees engaged over the long term.
For financial well-being interventions to be successful they need to be part of a process that involves ongoing intervention and engagement across all income groups and throughout a person’s lifetime.
A comprehensive approach is required, incorporating human capital development, debt management and the traditional financial services areas such as insurance and wealth management.
It is also important that appropriate financial well-being measures are identified, as well as those that can be controlled and have a high likelihood of improving financial well-being when the appropriate intervention is put in place.
John Anderson is the head of group client solutions at Alexander Forbes.
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