In looking to protect financial resilience, UK employees appear to overwhelmingly prefer the building of an emergency fund to arranging other financial protection products. Whilst to protect financial resilience every individual should always have some emergency fund, it’s down to individual circumstances as to whether other financial products such as income protection or life assurance are relevant and needed alongside the emergency fund. That said, the comparisons are wide and stark, with three quarters of employees having an accessible emergency saving pot, 61% actively saving more into this in the wake of the Covid pandemic and just 6% of UK employees who have income protection.
The new report, ‘Expecting the unexpected: a spotlight on preparing for a crisis’, highlights the extent to which the past 12 months has changed the financial plans of employees across the UK. The findings show that whilst the vast majority of workers in large organisations have held an insurance policy in the last 12 months (90%), (mostly car (69%) and home insurance (68%)), far fewer have arranged products designed to protect their financial, mental and physical health.
| Insurance products held in the last 12 months | |||
| Total | Male | Female | |
| ALL Health insurance | 37% | 40% | 35% |
| ALL Life insurance | 20% | 23% | 17% |
| ALL Critical Illness protection | 16% | 16% | 16% |
| All Dental insurance | 10% | 13% | 8% |
The Close Brothers 2019 Financial Wellbeing Index found that UK employees scored just 43 (out of 100) when it came to their understanding of personal financial protection, with 12% having purchased critical illness protection, 8% income protection, and 25% life insurance in preparation for unexpected financial events. Our latest findings reveal that there is a growing interest in protection products. Around two in five (37%) now have life insurance, one in five (20%) have health insurance, and 16% have critical illness protection.
According to the Association of British Insurers, one million employees a year find themselves unable to work due to a serious illness or injury. This figure, extrapolated from July 2021 ONS data, equates to around 3.5% of UK workers. So as employees broaden their financial commitments, such as getting on the housing ladder, the importance of having that additional financial safety net rises.
Importantly, greater security is also offered by more robust preparation and the signs are positive. One in five (20%) employees have recently written or updated an existing will, rising to more than a quarter (26%) of those aged 55+. And while 5% have recently put a lasting power of attorney in place, there is a significant gender divide – 8% of men compared to just 2% of women.
Jeanette Makings, Head of Financial Education at Close Brothers said: “The Covid pandemic has put UK employees under a huge amount of financial strain. But diamonds are forged under huge pressure and all the signs are that UK employees are going to emerge more aware and focused on improving and sustaining their financial resilience.
It’s important to remember that not all protection products will be needed or even suitable for every UK employee. The key is understanding what protection products and measures are available and how to assess their value as part of an individual’s own financial plan to provide financial resilience and peace of mind.
That’s the role of financial education. Giving people the tools, knowledge, and confidence they need to diagnose their situation and identify the remedy, so ensuring that their financial future is more robust. Employers themselves should seize this initiative. Not only are they best placed to deliver comprehensive and tailored financial education, they would also reap the rewards of a workforce more resilient to everyday financial stresses.”
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