August 08 2022 | Simon Miller
August highlight reel: Pensions Awareness Week
Every month I take the team at nudge through a concept related to financial planning and wellbeing and this month it was pensions.
2 min read
In 2022, personal finances will be dominated by the fall-out from the pandemic. Over $15 Trillion has been parachuted into the world economy by Governments, predominantly through increased debt and printing new money (quantitative easing.)
The impact will be felt by your people, no matter their salary bracket or location, in three main ways:
The unprecedented financial stimulus (alongside supply chain issues) is pushing up prices. Inflation is at a 30 year high in the US, and from Latin America to Europe, inflationary pressures are adding significantly to the cost of food, clothing and energy. The UN reports that global food prices increased by 27.3% in the 12 months to November 2021. According to Ipsos, two-thirds of people globally are feeling the pinch.
A second impact of printing money at such a scale has been to inflate asset prices. When we look at US equities and crypto by way of example, it’s hard not to suspect we are in a bubble. Assets are historically over-priced and as we saw in 2008 (when the US mortgage market blew up) the impact of a bubble bursting could be significant and far-reaching.
In order to tame the inflationary tiger, central banks are tightening monetary policy and looking to increase interest rates. Poland, Hungary and the Czech Republic are among the nations that have already seen increases and policymakers in both the US and UK indicate there could be three rate rises in 2022. The impact will be a further squeeze on holders of mortgages and other credit.
Impact on expected pay increases
With less money to spend, it is inevitable employees will be seeking higher than expected pay increases, which will prove expensive for employers. If we take a 10,000-employee organization with an average salary of $50,000, each 1% pay increase costs an additional $5,000,000 each year.
Alongside these Covid induced challenges, there are two further trends in personal finance to engage your people within 2022.
Interest in ESG investments was strong in 2021 and will accelerate in 2022. Consumers want to know that the stocks they hold in their savings and retirement plans meet ethical standards on the environment, as well as treatment of staff and suppliers.
Finally, we will see the continued rise of “Finpowerment”, with people continuing to take their financial situation into their own hands. Pinterest has reported that millennial's are driving the trend, with searches for “financial education” up 155% and “investment tips” by 195%.
You have a responsibility and an opportunity
The business case for impartial financial education, delivered through the workplace and which can be deployed globally has never been clearer. This will ease the pressure of salary increase expectations and help employees navigate risk. Those that feel supported by their employer are: