Saving is a key priority for
both young and old. Employees below the age of 40 tend to save for their
retirement, ferreting away for a nest egg early in their career, even as their
older counterparts in office tend to concentrate on the retirement plans of the
employer.
Retirement plans at
corporates has emerged as the top source of income for many employees. Minimal
social security and inadequate awareness about suitable retirement savings
options have resulted in employees becoming over-dependent on the retirement
plans provided by employers, according to a new study by professional services
company, Towers Watson.
``Most employees
today want to retire early, and recognise the need to save more, irrespective
of their age group. Our research has shown that the employer retirement plan is
the most important method for saving for retirement, and is a key retention
tool for most employees,'' said Anuradha Sriram, Director-Benefits, Towers
Watson, India.
In an interaction
with Business Line about the survey, Sriram said, ``Employees across the board
tend to prefer guaranteed retirement benefits, since few employees have
confidence in affording long spells in retirement, especially with increasing
longevity and high inflation.''
The study noted
that Indian employees are heavily dependent on their employers for
post-retirement income, and that retirement benefits have emerged as an
important retention driver at firms, and the numerous no option across all age
groups.
Employees who are
members of a retirement
plan at their company, tend to believe that their most important income
source during retirement would be their employer's retirement plan, followed by
savings and investments and buying property.
``For employees
above 40s, the retirement plan at their company is the most important method of
saving for retirement. Our research also shows that when retirement plans meet
employee needs, they provide a higher incentive to stay on with the current
employer,'' she said.
The trend is
accentuated amongst employees approaching retirement, with 78 per cent of those
with a retirement plan surveyed stating that their retirement plan was the
primary way they would save for retirement, compared to 68 per cent of those
under forty.
Global field
It is not always
higher pay and perks that drive workers. Given a choice between a better
retirement provision and a larger base pay, employees have begun opting for
generous and guaranteed retirement benefits. However, when given an independent
choice between the various components of rewards, Indian employees tend to
prefer a larger base pay hike across all age groups.
This contradiction,
said Sriram, signalled a visible need for employers to enhance retirement
education, and help employees understand the value of retirement benefits.
As the war for talent
intensifies across industries, progressive employers would do well to
re-examine the total rewards mix and leverage the benefits as a differentiator,
she added.
As for corporates
aiming to retain younger staff and cut down on attrition, Sriram said, ``Employers
should ideally examine the total rewards mix, to align with the strong desire
for generous benefits and guarantees. They (employers) need to provide tools
for employees to plan for their retirement, and help them to save more and
manage their financial risks. They should also provide flexibility in the
benefits they offer, to cater to the diverse needs of their workforce.''
The survey was
undertaken across 12 countries, with the participation of 22,347 employees
working for large, non-government employers. The results showed that emerging
economies like India and China tend to enjoy a higher savings culture, as
compared to their western counterparts like the US and UK.
From India, there
were 2,006 employee responses, of which 1,669 employees are members of a
retirement savings plan. The Indian workers surveyed had an average age of 34
years, and a female population of 40 per cent. All the Indian respondents are
employed at large, non-government establishments, and represent all job levels
and major industry sectors.
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.
``Our research
showed that for employees below 40 years of age, the retirement
plan company is again the most important method for saving, after investing
in property,'' said Sriram.
The global study
aimed at examining employees’ preferences for financial security, and how they
have been reshaped in recent years. The countries surveyed account for over 60
per cent of global GDP, and over 80 per cent of global retirement plan assets.
[source: http://www.thehindubusinessline.com/news/states/steering-retirement-plans-to-assured-benefits/article6605300.ece]
