“We have witnessed a dramatic global shift… towards private retirement saving plans, in which benefits depend on the value of accumulated assets. This has transferred significant risks from the state and employers to individuals … accompanied by a trend towards lower overall contribution rates.”
OECD/Cass report quoted September 2016 in PARC Report: “The Retirement Dilemma”
Populations are aging, social care has become a critical societal issue, government deficits have expanded in line with increased demand for services, and the global experience of low returns and high volatility has reduced public confidence in retirement savings. The twin challenges of investment risk and longevity risk, that most companies have transferred to their employees, now raise very significant concerns about the adequacy and security of future retirement income.
According to the Great British Retirement Survey published in October 2021, more than half of 24- to 29-year-olds think the state pension won’t exist by the time they retire. How a company chooses to support its employees to understand and confront these issues will become a source of strategic advantage in an increasingly competitive labour market.
The flipside of “pensions freedoms” has been the bewildering decision-making process. The Resolution Foundation has argued that financial education is a pre-requisite to taking financial advice, to avoid the risk of “making financial choices that inflict further punishment”. And yet fewer than 10% of people in the UK are taking any form of financial advice that might enable them to understand the risks, the range of providers, their services, or their cost structures. While most employers agree that financial education is important, only 30% say they are doing anything about it. Furthermore, only 18% plan to increase their spending on it.
Our 2016 report was subtitled “Sleepwalking into a Crisis?”. Five years on, it looks like we are still on course for the potential crisis in “later life income” that awaits our employees.
Our session will focus on the potential role of the employer in ensuring that their employees are better equipped to plan their own finances for later life. Together with the accompanying report, this session will provide insights to help companies develop support strategies and mitigate the looming crisis.
Global Co-Leader Next Stage of Global Transformation Services, Mercer
Yvonne Sonsino is currently focusing on the organisational implications of macro trends such as increasing longevity, 4IR future of work scenarios and sustaining a truly inclusive workforce. Mercer’s Next Stage platform examines the coalescence of living and working longer, and how organisations can harness the longevity dividend as we move into an increasingly digital age. She co-chaired the UK Govt. Department for Work and Pensions Fuller Working Lives Business Strategy Group, working with employers to recruit, retain and retrain older workers, which published its policy document in 2017. Her first book, The New Rules of Living Longer, was published in November 2015, with a foreword from the UK Pensions Minister. She is an advisor to the Healthy Ageing challenge fund and is currently working on a global dialogue series called ‘Redesigning Retirement for the 100 year life’ with the World Economic Forum. She has worked in senior HR and HR Consulting roles for 30 years, living in the Middle East and Europe and working with global organisations on strategic HR and people programme design.