Risk Management road sign (Photo credit: Wikipedia)
Is this a stupidly obvious or obviously stupid question?
If you fall into the “stupidly obvious” camp you are one of a dwindling band of devotees of the paternalistic culture that believes that a lifetime’s work with an organsiation should be rewarded with a seamless migration into a properly funded later life. If you fall into the “obviously stupid” camp, you reckon that once your employer has given you your living, it owes you no more.
However we may moan, the majority of large UK employers still regard the retirement of their staff as something that matters to them. The shift from reward to risk is obvious, employers now talk more about the risk of not being able to say goodbye than their moral obligation to see long servers right. But in practical terms, the issue is the same “how can we make it easy for our staff to wind down and stop working?”.
As we shifted from DB to DC, wr rightfully recognised that there was a transfer of risk from employer to employee but this transfer has been defined in terms of investment and contribution risks. Make sure people join, contribute and invest sensibly job done.
The job is not done. Thousands of people who joined DC plans, contributed properly and took studied investment decisions are now looking at retirement incomes arising which are derisory relative to the projections given to them when they signed up.
Ok – part of this is down to investment returns but the big part of the problem is that the annuity conversion rates are up to 40% worse than on those original projection statements.
We know that the majority of people buying annuities do not get the best deal available to them and that most of them do not have access to the advice that even gets them to the point when they take an informed decisions.
We know that employers plough millions into DC pensions and more into advice about investments, governance committees and the paraphernalia that surrounds “employee benefits”.
But we know nothing about what happens when an employee, whether in the company pension scheme or not, reaches retirement. At best he will get a party but for the most part, those people leaving employment in their sixties (and often fifties) are leaving for an uncertain future of part time jobs, diminishing savings uninformed financial purchasing and “nugatory” pensions.
We do not need it to be like this.
If the army of people who sell employee benefits are to maximise the value of their efforts, they’d better realign themselves towards the needs of the burgeoning ranks of those moving out of the workplace because they are too old, too knackered and unskilled in many of the new jobs that we are training our youngsters into.
As I am patently one of these oldies, I am writing as much to engender the help of others for me as a “cri de couer” to my colleagues who are capable of providing the services I need. I do not feel conflicted! I feel uniquely able to call for change!
I want my company to help me to retire, I want to help other companies help their older staff retire and I want people like me to kick up a fuss so we don’t end up in some “Toy Story” situation!
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Yes, all well and good, but what EXACTLY has this article got to do with wraps per se?
Peter,
I’d like to think that the reason companies set up corporate wraps is to give staff better retirments. Shouldn’t we look at the bigger picture as well as the specific issues relating to wraps?
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Coming from the “obviously stupid” camp, and hoping that refers to my response to the question rather than a personal assessment, I’m thinking that the one constant in all of this is the employee. As we move across multiple employments in our lifetime, there is less opportunity for the paternalistic approach to take root, so I can’t see how employers can feel obligated to feel responsible for their employees who happen to be with them for their last employment. It feels a bit like musical chairs, the employer they’re with when the music stops has to assume responsibility.
I think we need to be focusing on ways of getting results independent of employers in order to keep employees focus on their own preparation for retirement. Incidentally, I feel sorry for those employers who have good DB schemes, because they’re not going to get the level of employee movement and cross-industry fertilisation that is so needed for dynamic growth these days. The few remaining DB schemes are going to act as shackles, with even disgruntled employees staying on because they’re can’t get the same level of benefits elsewhere.
There’s a lot in what you say Tom – especially about the employment skew created by DB (especially the final salary variety).
But I’m uncovinced that there is not a link between the employer and the person retiring from their employment. The world of compulsory “auto-enrolled” pensions in the UK will make this link explicit. I’m not sure of the trends in Ireland but there is still a strong sense if not of paternalism , of collectivism in UK pension provision that I would be sorry to see broken.
That said, the employer is not the only entity around which collectives can develop..
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