Employer retirement plans have emerged as the top source of income for retirement for many employees, according to the Global Benefits Attitudes Survey, conducted by global professional services company Towers Watson.
Minimal social security benefits and inadequate awareness about suitable retirement savings vehicles have resulted in employees becoming over dependent on retirement plans provided by employers.
Employees who are members of a retirement plan believe that their most important income sources during retirement are likely to be their employer retirement plan, followed by savings/investments and property.
This trend is accentuated amongst employees approaching retirement, with 78% (of those with a retirement plan) saying their retirement plan is the primary way they save for retirement, compared to 68% of those under forty.
Interestingly, only 12% of Indian employees who agree their retirement plan meets their needs plan to leave their organisation in the next 2 years compared to 39% of those who disagree the plan meets their needs, signalling a noteworthy co-relation between the two and a likely confirmation that retirement benefits are emerging as an important retention driver.
The survey undertaken across 12 countries, drawing participation from 22,347 employees working for large, non-government employers, shows emerging economies like India and China enjoy a higher savings culture as compared to their western counterparts like US and UK.
With a majority of Indian employees expecting to retire around 60, despite a high savings rate, a large number are not confident of affording a long spell of retirement.
Employee preference mismatch
When given a choice between a better retirement provision and larger base pay, employees have begun opting for generous and guaranteed retirement benefit. However, when given an independent choice between the various components of rewards, Indian employees prefer a larger base pay hike across all age groups.
This contradiction signals a visible need for employers to enhance retirement education and help employees understand the value of retirement benefits.
“Traditionally, retirement planning has never been an important financial priority owing to the Indian family structure and elders dependence on their children," says Anuradha Sriram, Director – Benefits, Towers Watson, India.
"However, the breakdown of traditional support systems, increased longevity, rising inflation and rapid urbanization now require a large proportion of the current working population to build their own retirement corpus.”
"As the war for talent intensifies, retirement benefits have emerged as a powerful tool to boost employee retention and given its growing importance, progressive employers will re-examine the total rewards mix and leverage such benefits as a differentiator,” she further added.