Financial scams (& the impact on wellbeing)
25 October 2021
A financial scam is theft. And like other – more physical – forms of thievery, it usually leaves the victim both financially and emotionally poorer.
Yet the emotional cost is so often overlooked in the reporting of such issues. So consumer magazine Which? has sought to put a monetary cost against this less apparent cost of each crime.
Which? found that the impact of scams on victim wellbeing cost the UK some £9.3bn each year, with the average impact per victim of £2,509. And for online fraud the estimate was even higher, at £3,684 per crime. Indeed in many cases the emotional financial impact was actually higher than the actual monetary cost of the fraud.
The research also found that being a victim of fraud is associated with significantly higher levels of anxiety, lower levels of happiness, and even an increase in self-reported ill health in some cases.
In simple terms financial scams damage personal wellbeing.
Where do employers fit?
Which of course suggests that this is also an issue for employers.
Employers of all sizes spend significant amounts of time and money seeking to maintain and improve employee wellbeing, with the assumed return being that a happy and healthy employee is likely to be more engaged and productive during their working hours.
Of course the employer can’t be held responsible for every external factor that harms the wellbeing of any one individual employee, but it is in everyone’s interest for the employer to try and steer workers away from something as potentially damaging as a financial scam.
And right now that messaging becomes even more important, with the personal finances of millions of employees and their families facing some severe restrictions in the winter months ahead (as we reported in this post last month).
What about pensions?
Yet there is another, perhaps even more important, concern for employers around the impact of financial scams. And that relates to the employee’s retirement savings and the employer’s company-sponsored pension scheme.
As we featured last year, there are valid concerns that the financial pressures of the pandemic –coupled with the sometimes complex pension “freedom” rules introduced in 2014 – leave employees (and particularly those only a few years from normal retirement age) more exposed to pension scams.
Indeed the Work and Pensions select committee said last year that;
“Pension savings are often people’s single largest financial asset. The high value and fact that people often do not have to engage with their savings until much later in life makes them an attractive target for fraudsters.”
And of course being defrauded of part or all of your retirement savings would be emotionally – and financially – devastating in equal measure.
Yet there are many such scams every year, and each one has the potential to destroy someone’s retirement plans. Which in turn can leave the individual with few choices other than to continue working way beyond their expected retirement date, even when they might have an only limited desire and motivation to do so. This is clearly bad for both employer and employee.
The employer role?
And if the scam is directly associated with the employer’s company-sponsored pension arrangement, then this even has the potential to damage employee/employer relations way beyond the individual that has been subject to the fraud.
It follows that it is very much in the employer’s interests to help employees spot signs of potential financial and/or pension fraud.
So we would encourage many more employers to visit The Pensions Regulator’s page on how to avoid pension scams (please follow this link), and also to reinforce that message via all communication mediums with their employees. Of particular use is this simple “Don’t let a scammer enjoy your retirement” leaflet, which provides practical steps to help employees avoid becoming victims to this type of crime.
We would also encourage many more employers to continue to offer all employees access to group pension surgeries and/or personal guidance sessions with their usual Howden Employee Benefits & Wellbeing consultant. These sessions can be easily and conveniently delivered via online meetings, and will provide practical insights to help all savers make informed decisions around their retirement savings.
For more information on any of the above topics, please speak to your usual Howden Consultant in the first instance, or visit our website for other contact options.
Steve is Head of Benefits Strategy, Howden Employee Benefits & Wellbeing, and is an award-winning thought leader on Pensions, Employee Benefits, and Human Resources issues. He is occasionally accused of making Employee Benefits interesting.