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Calls for new imperatives for financial security

Eve Read
poverty

New research on consumer, business leader and public sector leader views provides actionable insights on how to address the financial savings gap. The United Kingdom is one of the least financially secure nations amongst the 12 surveyed. Contributor Eve Read, Consulting Leader, DC & Individual Wealth, Mercer.

Findings from a new survey focused on financial security from Mercer’s Healthy, Wealthy and Work-wise new global research identifies critical imperatives for financial security.

The study, which was conducted across 12 countries, seven regions with 7,000 adults 18+ and 600 senior decision makers from private and public sectors, showcases relevant data and outlines potential actions to improve financial security, including the following findings:

People are not confident they will have enough money to retire: People expect to spend 15-20 years in retirement (13-18 years in the UK), but without better planning, many will outlive their savings. With personal savings not enough, research demonstrated that only 26 percent of pre-retirees (25 percent in the UK) are confident they will save enough for retirement.

The retirement age is gone: The expected retirement age no longer applies, as people are working longer either out of choice or from economic necessity with people in the UK more likely than other nations to see themselves retiring at 70+. Around two-thirds (68 percent globally, 65 percent in the UK)) expect to keep working in some capacity or never retire. As working longer requires a degree of physical fitness, health is now vital to wealth. Yet only 39 percent (43 percent in the UK) profess to be in excellent/good enough health for the job they have today.

People are not proactively saving: Eighty one percent of adults (87 percent in the UK) feel personally responsible for their retirement income, yet many do not take requisite actions. Various factors (stress, affordability, access and confidence in investing, age, gender and stage of life) affect people’s ability to save and invest. Currently, one-third of those surveyed globally and almost half (45 percent) of those in the UK indicated they have not made any financial calculations to understand their retirement needs– and the largest work force segment (millennials) change jobs more frequently which also has significant impact on savings. Women face a gender gap in salary inequity and career continuity; and “gig” or informal economy workers are virtually on their own.

Employees trust employer savings advice: Survey results demonstrate that people have a high degree of trust in employers’ advice, with 79 percent (82 percent in the UK) of those surveyed claiming they trust employers to give sound, independent advice on planning, saving and investing. This data point demonstrates opportunities for employers to play a crucial role in addressing current investment roadblocks for individuals. By comparison, only one out of six (13 percent in the UK) of those surveyed said they have consulted a financial advisor to calculate retirement savings, perhaps because only 56 percent (49 percent in the UK) of survey respondents indicated they trust financial advisors.

Everyone must pitch in: Individuals, employers, governments must work together to ensure financial security for all. Innovation, technology, new ways of thinking and cultural adapting all play a part in reinventing expectations to meet new realities.

“Everyone has a role to play in closing the savings gap”, said Eve Read, Consulting Leader, DC & Individual Wealth, Mercer. “The majority of our research participants trust their employer to provide sound independent advice and although many companies may not want to offer advice, they can have a real impact on the financial security of their workforce through other initiatives. The employee benefits market is constantly evolving and offering benefits such as financial education or the short term use of pension contributions to meet other financial priorities are a good place to start.

“Evidence suggests that workers without financial concerns are more productive and those with employers who provide financial wellness solutions are more engaged in their work. It’s a win-win for both employers and employees!” added Ms Read. The results from the research call for significant and immediate action to resolve the current, global financial savings gap.

“The catalyst for our research was the convergence of several global trends including economic uncertainty, pension shortfalls, people living longer, ageism and reductions in employee benefits among other factors. These trends intersect health, wealth and careers, so planning for financial security must account for each of these core areas,” said Rich Nuzum, President, Wealth, Mercer. “The existing expectation to retire at a certain age no longer applies. As people live and work longer, it is time to retire the concept of retirement as we currently know it. To live well later we need to act now – and responsibility to act is incumbent across the private sector, public sector and individuals.”