Nine out of 10 (90%) global respondents provide employees with a defined contribution (DC) pension scheme as their main form of workplace retirement provision, according to research by PricewaterhouseCoopers (PWC).
Its research, which surveyed 114 multinational employers, found that the same percentage (90%) still want to play a significant role in the provision of retirement benefits to their employees.
The overwhelming majority (97%) of respondents said providing retirement benefits is important in helping them recruit and retain the employees they want, whike 93% said it is important in maintaining their reputation as an employer of choice.
However, only 15% of respondents felt their current benefits policy is sufficiently effective for the new world of work.
Combined, respondents have defined benefit (DB) pension liabilities of $950 billion (£568 billion).
Almost 80% of respondents have global defined benefit (DB) pension liabilities that exceed a third of their organisation’s market capitalisation.
Some 88% are concerned about the risks their global DB pension obligations pose to their organisation’s balance sheet, with 83% being worried about costs, 76% concerned about the impact on cashflow and 58% worried about the impact to credit rating.
To address legacy DB liabilities, half of the employers surveyed plan to explore options to offer current and former employees cash or other terms to give up legacy liabilities, while 45% are actively looking to transfer liabilities to insurance organisations.
The research also found:
- 83% of respondents are closing their DB pension plans to new employees.
- 71% also intend to freeze DB accruals for their existing employees.
- 83% of respondents plan to give more flexibility to their employees around how they save for retirement.
Marc Hommel (pictured), global pensions leader at PWC, said: “While the death of DB retirement arrangements is not a new phenomenon in the English-speaking world, it is striking how pervasive this has become globally, even in those countries with the most complex and restrictive regulatory and labour environments.
”Multinationals are resoundingly rejecting the open-ended financial risks of defined benefit [pensions].
“As to the future of workplace retirement provision, many employers are still grappling with what to do. There is wide recognition that employers need to innovate to meet the needs of the new world at work.
“Simply providing defined contribution arrangements for employees is not enough. Current arrangements are delivering inadequate retirement savings and are not effective for the new world of work.
“Employers recognise that they need to do more to help employees in their retirement decisions, and that they are currently failing in this aim.
”Despite employers almost unanimously agreeing that education, empowerment and flexibility are essential ingredients in retirement benefits in the future, there is still a long way to go before this becomes common practice.
“We expect employers to spend more time and money embracing new paternalism as part of their reward strategies. This will be an essential step in creating retirement benefits provision that results in better outcomes for employees and employers alike, within acceptable costs and risks for the employer.”