The concept of a job for life is a thing of the past. Workers are having to take more responsibility to finance their retirement, even though most are not equipped to do so. Employers should help redress the balance by creating age-friendly workplaces, which include employer pension plans and benefits that help workers have an easy transition into retirement, experts say.
Given the recent tumult created by the Covid-19 pandemic, many people may be rethinking their retirement plans and when and how they are going to retire. Yet, regardless of age and time spent in the workplace, we should all be taking steps to ensure a financially secure retirement. While the responsibility is increasingly shifting to individuals, most of us are not equipped to be our own chief investment officer.
This is a consistent message coming for several years now from the annual Aegon Retirement Readiness Survey and report produced by Aegon's Center for Longevity and Retirement (ACLR) and its research partners nonprofits Transamerica Center for Retirement Studies and Instituto de Longevidade Mongeral Aegon. Based on responses from 16,000 people in 15 countries, the report finds that only 25 percent of workers say they are on track to achieve the income they will need in retirement.
The solution, the research partners say, is a New Social Contract on Retirement. This contract would foster collective action by individuals, governments and employers.
The latest report makes the case for the active role that it says employers can and should play. The New Social Contract: Age-Friendly Employers highlights that all social partners need to come together in solidarity and outlines the vital role employers play in creating, age-friendly workplaces and helping "build pathways to retirement".
To mark the launch of the report on June 24, leading experts on the future of work, longevity and retirement took part in a virtual panel discussion. Moderator Mark Twigg, Executive Director of Cicero/AMO and Mike Mansfield, Program Director of the Aegon Center for Longevity and Retirement were joined by the following experts:
- Debra Whitman, Executive Vice President and Chief Public Policy Officer at AARP
- Professor Luiz Roberto Cunha, Economist, Professor and Dean of the Social Sciences Centre at PUC-Rio University
- Catherine Collinson, CEO and president of nonprofit Transamerica Institute and Transamerica Center for Retirement Studies
People are living and working longer than ever at a time when traditional government-funded retirement systems are coming under increasing strain.
Governments, according to Cunha, need to take steps to bolster existing retirement safety nets. The Covid-19 pandemic has piled on extra pressure on already strained social security systems. He cited his home country Brazil, where reforms have achieved parliamentary backing for long discussed reforms of the social security system. As in many countries, one suggestion has been to increase retirement age. Cunha noted that in in Brazil this could be particularly difficult for lower-income workers as they are more likely to have physically demanding jobs.
Why employers should help
Clearly there are problems. But why should employers make the effort to create age-friendly workplaces and help their employees with retirement planning?
"It is imperative we use all the human capital that we have not just for business, but for the economy as a whole," said the AARP's Whitman.
This means taking advantage of a multigenerational workforce, something many businesses have been slow to do. Employers might be proactive if they realized the potential economic benefits, Whitman said. For instance, research by the AARP has indicated that if workers over 50 had their own country this country would produce US 8.3 trillion of economic activity. "If you don't have employees from this marketplace you will not be able to serve it well."
What needs to be done?
Employers should create age-friendly workplaces, which means they must accommodate the needs, not just of older employees, but employees of all ages, Whitman said.
Collinson agreed. "An age-friendly workplace embodies inclusivity, diversity and a multi-generational workforce. Age-friendly employers cultivate a culture in which workers of all ages have the opportunity to contribute, learn, grow and succeed."
Companies must do more to build pathways to retirement. Many employees want to cut back as they move towards retirement, but only 28 percent of those surveyed said their firms offer services to phase-into retirement. As Collinson put it, employers still have a long way to go on this front.
The panel pointed to other practical steps - drawn from the latest retirement readiness report - which employers can take. The first is to provide a company retirement plan, something that many employers do not do. Collinson: "Only 52 percent of workers in the survey said they are offered a company retirement plan. As part of these plans, employers can offer investment guidance, planning services, and financial wellness resources. Access to education, resources, advice can be a tremendous help for workers get on the path to secure retirement."
Would you like to hear more of the panel's insights?
Watch the full discussion here