Employers making strides in retirement & pension offerings

29 February 2016 Consultancy.uk 5 min. read

Saving for retirement remains a paramount concern for some, and not much of a concern for many. The reality of needing a nest egg on which to retire is expected to become more prominent for employees as some of the US’ largest employers seek to make the need to prepare for retirement clear through a range of tools, educational campaigns and services. Improving the financial well-being of employees has the benefit of reducing stress in some, while also potentially boosting engagement.

The need to save for retirement is a growing concern for state entities, businesses and employees themselves. The stress that may follow from inadequate financial planning or poor remuneration has been shown to be highly deleterious to human life as well as productivity, suggesting that it is in the interest of both employers and employees to having enough money available and a strong saving attitude. Recent surveys highlight, however, that not enough is being done, while campaigns have been started to inculcate the need to save early in a person’s development.

Respondent Demographics

In a recent survey from Aon Hewitt, titled ‘2016 Hot Topics in Retirement and Financial Well-Being’, the consultancy surveys more than 254 respondents, ranging over more than 7 million employees, about the way in which they educate their employees about retirement and the kinds of tools and offerings they make available to reduce financial stress and improve retirement and post-retirement outcomes.

initiative likelihood of being address in 2016

Recent years have seen changes in employer behaviour regarding the way in which the defined contribution plan’s values are offered. According to Aon’s analysis, following the crisis employers were concentrating on increasing workers’ perception of their defined contribution plan’s value; however, as cost cutting and profit seeking in a post crisis world took effect, employers focused on mitigating risk and assessing the appropriateness of their retirement plan designs. Into 2016 however, employers have again changed tack, this time 56% say they are very likely to focus on the financial well-being of employees that expand beyond retirement decisions, up from 46% in 2015 and 30% in 2014.

The survey further found that 33% say that they are moderately likely to focus on the financial well-being of employees that expand beyond retirement decisions. Of the surveyed companies, 41% are very likely to measure the competitive position of the retirement programme, while 49% are moderately likely to measure/project the expected retirement income adequacy of their employee population.

added financial well-being in 2016

Organisations are also expected to expand the kinds of financial well-being services, tools, or educational campaigns they have available in 2016. Healthcare education come in as cited very likely by 36% of respondents, while 42% say that such an addition is moderately likely. A basics of financial markets programme is very likely to be introduced at 31% of respondents and moderately likely by a further 47%. A financial planning programme is likely to be introduced at just under 80% of those surveyed. The tools, services and educational campaigns of least interest are debt management, with fewer than 60% saying that it is very or moderately likely to be introduced, while prioritising savings is very or moderately likely to be introduced at 75% of those surveyed.

reasons for creating or expanding financial wellness programmes

The reasons for introducing more programmes varies somewhat, with employers providing multiple motivations for their choice to increase the stock of offerings. The most significant motivation is that it is the right thing to do, with 85% of respondents citing this answer. 80% believe that supporting their workers improves employee engagement. 58% are out to improve retirement statistics, while 44% feel that it reduces the time employees spend addressing financial issues. There is also a link to medical costs, with 26% believing the programme will reduce medical costs.

integrating retirement planning and health decisions

Surveyed organisations are also considering ways to integrate retirement planning with health decisions. Initiatives include communicating the link between financial stress and well-being, with more than 80% very or moderately likely to introduce such a programme in the coming years. Companies are also seeking to provide employees with support on prioritising their health and retirement decisions, with 24% very likely to do so and 51% moderately likely to do so. The least cited initiatives are incorporating defined contribution plan elections in annual healthcare enrolment, with 14% very likely to do so and 21% moderately likely to do so.