Today, people across the world live longer, work differently and, in keeping with those changes, have new expectations of their employers and workplace benefits. In our 2019 Global Retirement Reality Report (GR3), we’ve built upon the Happiness Formula, informed by our 2018 GR3 employee and retiree research, by applying an employer lens. This year, we’re exploring how employers can support the three dimensions of retirement happiness:
1. Preparedness: Gain a more comprehensive view of employees’ financial ecosystems
2. Trust: Stay current on the policy issues that affect retirement savers and, in as much as possible, continue to design plans that include automatic options and ESG investments
3. Ownership: Bridge the advice gap and invest in ongoing participant communications that follow the savings journey and support the retirement transition
We spent the first half of 2019 conducting interviews with 195 sponsors across five countries, chosen to represent a range of different retirement systems: Australia, Ireland, the Netherlands, the United Kingdom and the United States. The survey, led in conjunction with international data analytics firm YouGov, covered employers, referred to here as plan sponsors, with responsibility for 1.5 million participants in total.
A Note About Plan Sponsors
Within this report, plan sponsors are defined as the employers who engage with retirement savings plan design, management and communication to savers. In the different countries surveyed, employers have different levels of plan sponsor responsibility, with some employers being wholly focused on plan management and others taking a less tactical role. Regardless of their plan responsibilities, we found that those surveyed across all countries were invested in improved retirement outcomes for their employees.
Preparedness points to plan sponsors’ and participants’ assessments of whether their retirement savings will be enough to provide a comfortable retirement. For plan sponsors to be able to design the best plans, they need more insight into the progress participants have made on their savings journey.
However, changing demographics, increased job transitions over a single career, and the growth of the gig economy have highlighted the twin issues of portability and limited financial insight:
Portability or the ability to transfer accrued savings from past to current employers is seldom an easy task. The combination of administrivia and inertia can lead employees to have multiple savings sums with different employers - limiting their complete view of their finances.
Limited financial insight not only affects savers, but their employers, who aren’t confident that savers will have sufficient income replacement rates in retirement. On average, respondents across countries surveyed expected that their employees would have 29% of final income available to them in retirement. However, these same respondents were much more optimistic about employees’ ability to retire at retirement age (55%) and maintain their current lifestyle (53% of those surveyed believed at least 21% to 50% of employees will maintain their lifestyle, 28% believe the number is as high as 70%, or more). One explanation for this discrepancy is that given sponsors limited insight, they simply don’t know. In this case, not knowing restricts sponsors’ ability to provide the resources that could help those savers in jeopardy of a savings shortfall.
In order to build trust, it is essential that plan sponsors are motivated to meet the goals of their participants. We found that doing the right thing for savers is the sponsor’s top priority.