With continuously raging populations in developed economies, retirement systems are put under pressure. The systems in place must secure the population’s financial well-being while safeguarding public solvency. In order to build a sustainable retirement system, “the biggest challenge will be the cultural transformation shift from a history dominated by paternalism to a customer-centric world where members and employers have far greater power — and responsibility — to make choices”, says Ernst & Young in their survey “The $500 trillion prize”.
In more than 200 interviews with top representatives from 21 countries the maturity levels of retirement systems regarding the expansion of product offerings by service providers, active well-informed beneficiary participation in those products, and the regulatory environment that ensures transparency, consumer protection, effective incentives and innovation throughout the entire value chain was analysed.
Seven finding are key in their report:
Vision, strategy and role clarity are the foundation for public confidence. First, a clearly defined strategy and long-term vision must be formulated in order to capture long-term financial implications for the ageing population. All stakeholders must align and agree upon a long-term strategic policy to restore confidence in retirement systems.
Incentives shape decision-making. The report points out that many countries lack an incentive system that gets people to accumulate wealth for their retirement. This includes all shareholders: For members, such could include tax benefits, employees must be incentivised to inform members, fund as well as service providers must develop incentive systems fostering sustainability and governments bodies should develop policies fostering sustainability, efficient and effectiveness.
Empowering informed decisions creates distribution action. Members need to make decision on how to save money for retirement based on their specific living situation. In order to allow for smart decision making, members must be informed well. Members must be allowed to share experience, search, inform, track and transact on a platform.
Products must deliver financial well-being. Instead of just proving monthly payments, products must start including broader issues such as beneficiary protection, health care and planning for terminal illness. Many customers see social security, pension and retirement solutions as useful tools to achieve the overarching goal of lifetime financial well-being.
Consumer protection and fiduciary enable confidence. Because pensions are often the most important financial assets for their members, policy efforts must protect decisions, assets, conduct and confidence.
Stakeholder experience and being easy to deal with influence distribution success. If all stakeholders increase their efforts to let member share their experience and make retirement planning easier, satisfaction, confidence, informed action increases.
Digital can support informed decisions, choices and transactions. Digital ways can be used too communicate and distribute remittent systems. While corporate employers and product providers are generally more open to digital ways, especially governments and policymakers lack the usage of new communication channels to inform other stakeholders.