What’s Driving the Growth of Financial Wellness in Ireland?

In the last five years, the growth of the Financial Wellness market has taken the UK by storm, and now it’s making its way across the water to Ireland. And it is hardly a surprise.

Money problems are a root cause of anxiety and other stress-related illnesses, while poor financial health can lead to absenteeism at work, and higher healthcare costs for employers.

Around a third of Irish workers are worried about meeting their monthly expenses, according to research from PwC, while 50% of employees said that their top financial concern was a lack of emergency savings.

Although the concept of Financial Wellness is still relatively new to Ireland, in the UK research by Nudge* found that 29.8% of employers already provide it, with a further 17.3% in the process of introducing support and 48.8% considering introducing it.

As Charles Cotton, Senior Performance and Reward Adviser at the CIPD notes: “Employers are ideally placed to help support their employees’ financial welfare. They provide most of their workers’ earnings and they know when their important life events happen.”

Factors Driving Growth of Financial Wellness in Ireland

There are several factors fuelling a growing number of leading Irish employers such as the Irish Rugby Football Union, as well as FDIs including SSE, Samsung and Unum, to integrate Financial Wellness into their people strategy.

  1. Money is Ireland’s biggest headache

Money is still the biggest worry for 46% of people in Ireland – ahead of things like health and family – compared to 37% who said the same last year, according to a recent survey by Royal London. Among those aged 18-34, that figure rises to 51%, while separate research suggests 16-35-year-olds have less than €200 disposable income per month.

If employees can better manage their finances, they can stop worrying about money and start working towards achieving their financial goals and dreams. For some people, this will mean building up a substantial pension fund or paying off a mortgage early. For others, it will mean getting to grips with the effects of inflation and forming good money habits.

  1. Significant pension savings gap

The state pension is available to Irish taxpayers who are aged 66 or over currently, but will rise to 67 in 2021, and to 68 by 2028. The value of this pension will depend on the number of state contributions during working life, up to a maximum of €243.30 per week. This adds up to just €12,651.60 per year, meaning that most people will have to rely on private pension savings to ensure a good standard of living after retirement.

There are already plans in motion to introduce a new auto-enrolment system for pension savings in Ireland, which should make it easier for employees to save, as well as encouraging employers to supplement staff pension pots. As has happened in the UK and Australia, these plans should bring pension reform into the spotlight, raising awareness among younger people and highlighting the importance of planning for later life.

  1. Spiralling healthcare costs

Average health insurance premiums are set to increase by at least €600 per person over the next decade, due to increased claims from an ageing population, according to Irish Life. With “money” being the most reported cause of stress, and stress in turn so influential in broader mental and physical health, smart organisations are focussing on creating joined-up wellbeing programmes encompassing all elements of wellbeing. As Danielle Starbuck, Head of Reward at Samsung puts it: “The growing number of leading global employers attracted to Ireland is helping to fuel the war for talent and is raising the bar on what employee benefits packages consist of.”

  1. Housing market 

The financial crash hit Ireland harder than most and has meant that thousands of young people have been denied access to the housing market due to a shortage of properties, more stringent mortgage requirements and rising prices.

This is finally starting to change, thanks to a series of government incentives which have been designed to help first-time buyers: Help to Buy (HTB) and the Rebuilding Ireland Home Loan (RIHL). This is good news for first-time buyers who want to stop spending money on rent and start investing in a home of their own, and the long-term financial security that brings.

Homeowners are generally benefitting from low mortgage rates but talk of the European Central Bank (ECB) raising the base rate has increased. Though any rise is likely to be gradual, there is the potential for a knock-on effect for borrowers with an increase in repayments and reduction in disposable income.

  1. Income, savings & debt

Such low rates currently mean savers are getting little in the form of interest. But despite this, the number of people putting money away and the amount being saved is rising.

Household debt increased at the end of 2017 for only the second time since the crash and Irish households are the fourth most indebted in the European Union.

Debt as a proportion of disposable income, a clearer gauge of debt sustainability, continues to fall however, and household net worth grew by 4% over the last three months of last year, with rising property prices a key factor.

Inflation has been relatively steady for the past six years. Lower inflation means that the cost of everyday goods should remain low, but the same is also true when it comes to wage growth.

There is pressure on disposable income from the continued rise in the cost of housing – for both homeowners and renters. It’s now more expensive to live in Dublin than Silicon Valley or Abu Dhabi.

  1. The wider economy and global mobility challenges

Ireland boasts the fastest growing economy in the European Union for the last four years in a row.

While there is a question mark over the impact of Brexit, the country is bracing itself for a mini population boom. Applications for Irish passports have jumped by 25% since the UK’s EU referendum, a slew of big companies are moving their bases from London to Dublin, and Ireland is expected to attract more workers from the rest of the EU who no longer see the UK as a destination to live and work. These extraordinary levels of global mobility mean that organisations increasingly need to help support employees to assimilate on arrival in Ireland.

*The Financial Wellness Playbook 2018