Often retirement is not the first thing on people’s minds when choosing an employer. It is a concern that comes later as you get closer to leaving your job permanently or entering a different life stage.
Not in the Philippines. There, employees are worried that their employers will not support them well. So much so that employees are choosing companies that take care of their financial being when they retire.
The problem is not the lack of retirement support; the lack of pre-retirement preparation and education is causing retirement jitters.
Mercer’s latest Retirement Survey Report showed that only one in five companies in the Philippines prepares their employees well for retirement. Moreover, one in four companies has never conducted any activities on the topic.
Almost one-third (31%) of companies not having a formal retirement plan beyond statutory minimum benefit is making matters worse.
Harold Tan, Mercer’s wealth business leader in the Philippines, commented that companies need to address retirement concerns better.
“While it is primarily the individual’s responsibility to ensure their own retirement readiness, employers can lead by providing essential tools, training, and technology to engage employees in their long-term financial wellbeing.,” said Tan. “This includes offering a more flexible set of benefits so employees can fully maximize them and reduce their out-of-pocket expenses, which can improve savings. In addition, they can also increase personal financial planning awareness during bonus seasons to build a culture for preparing and risk-proofing the future.”
The good news is that companies are beginning to listen. This is partly because of the national shift from the traditional defined benefit (DB) pension plan to the defined contribution (DC) plan. The proposed Capital Market Development Act and increasing cost pressures are vital drivers.
Yet, nearly 8 in 10 respondents indicated they have not moved — or are unsure about moving — to a DC plan. About a quarter of the companies surveyed are still on defined benefit (DB) plans where employers carry the burden of saving and investing.
Findings from Mercer’s study also highlighted the need for employers to understand how they can improve investment performance and techniques to support their employees’ retirement plans.
At the same time, Mercer urged companies to spot retirement support gaps for their employees proactively. It noted that they could use data and analytics without violating privacy rules to measure how retirement options impact the behavior of older workers and run customized retirement planning workshops for those who may need more financial education or support.
“Employers in the Philippines need to recognize two key trends: first, employees want and need long-term financial planning, and second, the shift from DB to DC plans is accelerating,” said Teng Alday, Mercer’s chief executive officer in the Philippines.
“A well-designed DC plan, with strong governance and a disciplined investment program, will go a long way in ensuring the retirement needs of employees are met. It is now the time to take action,” he added.
Image credit: iStockphoto/metamorworks