The population is getting older. By 2050, the number of people over 65 years old will triple worldwide. As global demographics shift, how will retirement income needs be financed? Is the global retirement sector ready to meet these challenges?
Mercer has identified five issues that employers need to consider. These are difficulties you might be already experiencing.
The concept of retirement is fundamentally changing. Employers are beginning to face a real likelihood of a workforce that can’t afford to retire. Many employees need to keep earning wages to supplement an inadequate pension income, or to finance care needs.
To counter this, retirement plans are being designed as ‘saving plans’ with greater flexibility to plan for the future, both at and beyond retirement. But accepting that with increasing longevity, contributions must be higher is far from the global norm.
Longer life spans have brought elderly care to the forefront in developed nations. Income needs are changing as a result, but pensions are not keeping pace.
We have different needs for income at different stages in our lives, as we acquire education-related debt, mortgages, and dependants. But our earnings pattern does not match our income needs, especially at older ages when earnings potential is lowest and needs are most uncertain.
The ability to take a cash lump sum on retirement has long been a popular feature of pension arrangements and this flexibility is increasing. But organisations need to do more to help employees make the right choices for their circumstances, especially given the uncertainty of how long that cash needs to last.
Longer lives create increased costs and thus an increased impetus to consider how to de-risk pension liabilities. Good advice is essential to take advantage of the many opportunities on offer for both employers and employees.
If you would like to learn more, please speak with your regular Mercer consultant or contact the expert below.
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