While employers may recognize that the amount of time employees will spend in retirement is growing, people around the world fail to reflect this trend in their long-term financial planning.
Getting workers to save more for retirement is a global necessity and employers have a huge hand in improving the financial well-being of their employees in retirement, according to a study by Aegon and the Transamerica Center for Retirement Studies.
The organizations surveyed 16,000 individuals in 15 countries to find out their thoughts and wishes for retirement. It found that four in 10 people dont save anything for retirement, even though half of these people said they would like to. Forty-five percent of those surveyed said they would consider saving more for retirement if they received a pay raise and 33% said that generous tax breaks would help them save more as well. Simplifying investment products sold could also encourage one-fifth of non-savers to start saving, Aegon found.
People who are considered habitual savers earn roughly $41,000 per year or about $29,000 in emerging economies. Aegon stresses that if people chose to save for retirement beginning at age 20, they could boost their retirement income by $11,000.
More than one-quarter of employees surveyed had access to a defined benefit pension plan and an additional 18% had a defined contribution or money purchase plan, Aegon found. In total, 41% of employees said they have access to a workplace retirement plan with employer contributions. An additional 24% said they have access to a plan without employer contributions.
Changing the design of workplace retirement plans is crucial. By including features such as automatic enrollment and automatic escalation, employers already play a large role in some countries. Notably in the Netherlands, mandatory participation results in over 88% of employees being covered by private pension plans, Aegon found.
The survey found that 59% of those individuals who dont currently save for retirement, but would like to, say they would participate in their plan if they were automatically enrolled with a 6% contribution rate.
Aegon also found that six in 10 employees feel valued when they have access to a retirement plan at work, and 70% say that workplace retirement plans should be part of their basic pay and conditions. Having a better employer match for their plan also would encourage many employees to save more.
Aegon recommends that employers get more involved in helping employees save more regularly for retirement. Automatic features are a good way to get people enrolled in workplace retirement plans and giving access to both full- and part-time employees is also a must. Financial education about the benefits of long-term savings should also be considered by employers who want to help employees have a successful retirement.
Paula Aven Gladych is a freelance writer based in Denver.
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