Tony Pugh: Global challenges and solutions for DC pensions and financial wellbeing


A global financial wellbeing programme that takes into account localised pensions legislation, different taxation regimes and myriad different savings products might sound more like solving a Rubik’s Cube than building a benefits strategy.

However, the DC pension and financial wellbeing global employee survey, published by Aon in June 2019, shows that, beneath the operational complexities, employees’ needs are often similar regardless of where they are based. They are badly in need of tools to improve their financial wellbeing, make better money choices and save more long-term for retirement.

The survey explored defined contribution (DC) pension and financial wellbeing trends across the UK, US and Canada, finding out employees’ current financial priorities and what might inspire them to save more for retirement.

It identified several common trends, giving both domestic and multi-national employers useful pointers on where to focus future support for their workforce.

Employees’ financial confidence is variable. While two in three respondents said that they generally feel comfortable about managing their finances, over 40% of employees in total (35% in the UK) find dealing with money stressful.

This lack of confidence could be underpinning wider money worries. Debt is a common theme, with one in three employees overall not paying off their credit card balance at the end of each month, increasing to almost 50% in the US. Around half overall (50% in US and UK and 40% in Canada) feel they are unable to save more each month than they currently do.

However, it is positive to see that more than half of respondents stick to a monthly budget, which will help them to take better control of their money over time.

When it comes to retirement planning, the US leads the way. This may be related to the maturity of the DC market in the US, and the emphasis on financial education by US-based employers over a prolonged period of time. Two-thirds of employees in the US and Canada have a retirement savings goal, compared to just a third in the UK.

US employees are also more likely to set their own pension contribution rates, rather than sticking to the level defined by their employer. Just one in three save at their employers’ rate, compared to six in 10 UK savers.

This has important implications for the UK, where the auto-enrolment minimum rate of 8% of earnings could be too low to provide an adequate income in retirement for some employees. More than half of respondents to the survey worry about running out of money in retirement, so making sure that employees are aware of how their current level of pension contributions will affect their financial wellbeing later in life is now a real priority.

Uncertainty around retirement income is affecting employees’ wider decision-making about their retirement plans. One in three respondents in the US, and one in five in the UK, expect to continue working forever, in some capacity. While that will sometimes be from personal choice, for others it will be because they cannot afford, or do not know if they can afford, to retire. This will impact both the individuals, who will need to be able to work into their 70s and possibly beyond, and for employers in terms of future workforce planning.

Overall, the findings show that employees’ financial issues are wide-ranging, but similar in the US, UK and Canada. The report also suggests that financial education and guidance regimes in the US are starting to influence how employees manage their retirement planning.

Employers with multi-national workforces can be confident that a financial wellbeing programme which works well in one jurisdiction should also work well in others, if it addresses common employee needs such as debt management, budgeting and setting savings goals.

As a first step on this journey, organisations should carry out an audit of their employees’ financial wellbeing and the appropriateness of current benefits to meet employees’ financial needs. This can then be used to create a wellbeing programme, including the appropriate delivery mechanism and the business case for investment.

Tony Pugh is head of DC solutions at Aon