How companies can meet the three biggest challenges for schemes and employers
“Pensions are harder and riskier than ever,” comments Mark Rowlands, sales and marketing leader at Mercer. “The pensions industry and HR must work together to get the right employee outcomes.”
The statistics reveal a drastically different career path for today’s older generation: the average age of death is increasingly, and there has been a 50% increase in pensioners in the UK. Consequently the number of people working post-retirement has doubled over the past 10 years.
The financial stress associated with the choices people make in their lifetimes is costing companies billions of pounds in both absenteeism and presenteeism, and CEOs are expressing concern about their people strategy – but only 10% have a policy in place to deal with it.
“The pensions industry and HR must work together to get the right employee outcomes”
So what is the solution? Employers need to think about the value of employees to them in terms of tenure and retention of nurtured skills and talents – and the pensions industry and HR teams must work more closely together.
Rowlands suggests the three biggest challenges for schemes and employers are:
- Flexible retirement savings
- Delivering value for money
- Securing greater engagement and productivity.
“It is harder and harder to deliver value for money”
To meet these challenges, and create a default that meets members’ needs, it is necessary to start by understanding the final income ‘destination’ and then building the model based on what is required. This model will look at the savings phase (fund choices), the pre-retirement phase (critical engagement period), and the possible retirement destinations: cash, secured income (annuity) and variable income (drawdown).
It is harder and harder, says Rowlands, to deliver value for money: the causal risk between engagement and satisfaction has been shown to come from effective communications.
Emotional connection drives behavioural change – and so engagement needs to be targeted, not just at one stage, but through all phases of the retirement lifecycle.