November 13, 2015

How Pensions Are Evolving

How Pensions Are Evolving

"Generation Lost: Engaging Millennials with Retirement Saving" is a new study by BNY Mellon and Cambridge Judge Business School, University of Cambridge that surveyed 1,253 millennials between July and September this year. In this extract from the study, BNY Mellon’s Vince Pacilio, Global Head, Insurance Client Segment, talks about how pensions are evolving.

There is no shortage of conferences, research and policy statements in both developed and developing economics that speak to the retirement and retirement savings challenges facing our global society. The recent global financial crisis and the passage of time have moved these issues from a concern that was over the horizon and for discussion at a later time to one that is front and centre in all areas of local and national government, in corporate boardrooms and in homes around the world.

The world of defined benefit (DB) pensions is effectively closed to Millennials in the private sector. The defined contribution (DC) landscape is complex and challenging. DC market structure and product offerings vary from country to country because they have been moulded by the nature of different nations’ state provision, political and fiscal drivers and the structure of the labour market.
Thus individually led approaches in the US and UK create different challenges to those experienced in countries such as Sweden, Denmark and the Netherlands where collective DC arrangements exist. In both cases, engagement and education remain critical since parents in defined benefit schemes may not be the best mentors for their children in this area.

In particular, as this generation has so much more competition for their savings, the proposition for retirement savings must be compelling since planning for life in 40 years’ time is an understandably low priority item to most. Clearly, we know that those who save early will benefit most – there is no more significant variable than time. So reaching this cohort early on is vital.

It is also likely that there will need to be continued structural changes to the workplace to accommodate more part time, higher skilled, work in retirement to allow more people to have rewarding employment into their 70s when their savings prove inadequate.

To view the report, please click here.




Malcolm Borthwick
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