Shaping a happy and healthy financial future

At Legal & General, we want to help individuals have a happy and healthy financial future. From saving for a rainy day and better budgeting to getting out of payday loan cycles, a sustainable financial future means a better quality of life for individuals and their families.

That’s why in 2017 we invested £9.9 million for a stake of more than 40% in Salary Finance, a digital financial start-up that was working with businesses to help employees improve their financial wellbeing. Since then, further amounts have been invested by us and other leading backers, and today the company helps 3 million individuals from over 550 companies in the UK, 15% of which are in the FTSE 100.

The premise behind Salary Finance arose as a response to a deep-rooted societal problem: the less you earn, the lower your credit score and the higher rate of interest required. “There really is no other service in the world that has that dynamic,” explains Asesh Sarkar, Co-Founder and Global CEO of Salary Finance. “It’s like going into a sandwich shop and being told either: ‘You’re really rich so we’ll charge you £1 for a sandwich’ or ‘You’re young or really poor so we’re going to charge you £10’. It’s highly regressive and creates a huge wealth gap.”

By partnering with employers and linking to their payroll, Salary Finance helps to reduce employees’ financial risk, supporting them in the management of any debt and the building of savings. Employees’ daily earnings are also calculated to allow on-demand access to earned income throughout the month, salary-linked savings accounts allow employees to save without even thinking about it and a unique partnership with HMRC means those receiving Working Tax Credits or Universal Credit receive 50p for every £1 they save, as part of the government’s Help to Save scheme. Over a four-year period, this could equate to up to £1,200.

Those in high-cost debt repayment spirals, meanwhile, benefit from a sustainable alternative. “When we refinance £2,500 of someone’s debts, we on average save them £600 relative to what they were paying before. This helps them get out of debt six to 12 months sooner,” explains Sarkar. “Because of salary deduction, repayments are always on time. We report this to the credit bureaus, which means their credit scores increase by about 10%.”

A society-wide issue

“NHS nurses are working in very tough conditions – especially at the moment,” says Sarkar, who points out that NHS nurses are one of the highest users of payday lenders in the country. “The money they earn, which is not enormous despite everyone’s thanks, goes onto a loan that pays 400% interest. But we want to help that nurse get out of debt at a much lower cost, build their savings, get government top-ups and give them protection.”

Financial health is something that affects everyone in society, regardless of pay. A survey by Salary Finance found that those suffering from financial stress were four times more likely to suffer from mental health than those who feel positive about the state of their finances, and that those earning over £100,000 reported the same level of concern about their personal finances as those earning less than £10,000.

“People tend to think that this is for a certain group of people who are in a certain position with their financials, but you’d be surprised,” says Nick Frankland, Managing Director of Fintech at Legal & General. “Many times we have rolled this out to a very blue-chip organisation with very high average salary points, and the employees have said, ‘I was paying more than I needed to, you’ve just made my life so much easier.’ This is about making sure that we do our bit right across the UK population.”

The next chapter

Our goal is to help people, like the one million key workers supported by Salary Finance, plan the next chapter of their stories. “Every person has a story,” says Sarkar, “and those stories are very important.”

Acquiring business through employers, rather than the traditional model of acquiring customers one by one, means faster scalability, which means a better result for the individual and, crucially, faster, tangible support. Our focus is people, not numbers.

“That’s why the idea was so attractive to us,” explains Frankland. “It’s all about returning value to the consumer.” We recognise that wellbeing is a combination of physical, mental and financial health, and by supporting individuals with their financial wellbeing, we can have a big impact on their quality of life. “We want to get to a position where people have paid down high-cost debt, or at least pay a lot less for it, get used to paying off that debt and then, when the debt’s paid, roll that over into savings.” Says Frankland. “The ideal, happy path is that one day we’ll get to the point where we never hear from a customer again, because they’ve got a couple of thousand pounds set aside in their rainy-day fund. That’s the vision.”