Mercer connects the desire of employees for a secure financial future with the employer’s need to create a high-performing workforce.
THE CHALLENGES OF CREATING A RETIREMENT-READY WORKFORCE
In a defined contribution world, the responsibility of generating a lifetime retirement income has switched from employers to employees and retirees. Given improvements in life expectancies, the money needs to last a long time. Market volatility complicates the challenge of managing savings in retirement. Faced with a vast array of relatively complex financial decisions to make, individuals are doing a poor job of managing retirement risks and are not saving enough. Consequently, the decision to exit the workforce is being delayed.
For employers, the trend from defined benefit to defined contribution has been driven by increasing financial and legal risks to the organization. However, in recent years, Mercer has witnessed an important change in the retirement discussion amongst leading employers. They are taking a broader view of retirement-related risks as the financial crisis has made clear the unintended consequences of a wholesale shift to defined contribution. Workforce management-related risks are now becoming apparent, and so HR is re-establishing itself in the retirement decision-making process. For example, unforeseen costs are emerging as employers pay a high price to retire employees who otherwise cannot afford to leave. So called “build organizations” are seeing speed of promotions slow dramatically as choke points emerge with older workers who would have retired in a defined benefit world.
For employers to create a retirement-ready workforce, it is time to rise to the income challenge. At Mercer, we believe that a change in focus toward outcome-oriented goals for employers and employees alike can fundamentally alter the retirement conversation and deliver better results for all.
Insights on addressing the issue of retirement income adequacy
Why employers should focus on outcome–oriented goals for themselves and their employees