The report called ‘Introduction to Benefit Plans around the world: a Guide for Multinational Employers’ reveals that employers are most concerned with the fact that the concept of retirement is changing and many will be forced to postpone full retirement.
Many governments are extending the retirement age, as an ageing workforce means that the pool of retirees is growing faster than the number of productive workers who contribute to state or private sector sponsored retirement programmes. This will require employers’ programmes for older employees to change significantly. Whereas previous cohorts of retirees in high-income countries viewed retirement as a period of leisure, current generations are increasingly expecting some employment in old age, the report finds.
Also, DC plans are becoming the norm. Many multinationals have explicitly stated a preference for establishing only DC plans in the future. While several countries still have predominantly DB plans such as South Korea, Philippines, Japan, Canada, Mexico, Belgium, Israel and Netherlands, it is rare for an employer to set up a new one anywhere in the world.
Reductions in Social Security benefits and talent wars are raising employee expectations for improved, portable employer-provided benefits but employers are not rushing to meet this need.
Mercer’s report also shows that as more responsibility for retirement is shifted to the individual, there is a disturbing lack of employee understanding of how to ensure a secure retirement. With participation optional and contribution level left up to the employee, many employers are finding that individuals contribute less, start contributing late, invest conservatively and retire too soon.
Employers need to ensure employees understand their retirement plans through more effective communication, the report adds.
It says that retirement benefits may be inadequate for many employees. Unless supplemented by personal savings, many employees are likely to find their benefit plans can not deliver sufficient retirement income to ensure a comfortable retirement at the age the employee might expect.