By Kulin Patel
“Time flies” is one of the most common phrases you will hear. The essence of this is hugely significant when thinking about your long-term future and planning for retirement. A majority of employees in India are worried about their financial future and believe they will be worse off than their parents in old age. Retirement benefits are ranked among the top drivers of employee attraction and retention in WTW’s global study findings that include India.
I believe employers can play an important role in employees’ long- term financial future. In fact, the Willis Towers Watson’s Global benefits attitudes survey in 2015/16 found that nearly 60% of employees would welcome the move of employers actively encouraging them to save for retirement. However, less than 30% of employers provide supplementary superannuation plans and a similar number offer access to National Pension System.
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My top tips to employers for supporting their staff would be:
A. Educate: Plans that are statutory like Provident Fund and Gratuity are deemed retirement plans but they are not really. Employers need to make employees aware of what the retirement implications are and support them with online calculators, tools and communications to understand the entire ambit better. Recently, the announcement to allow up to 90% of one’s PF balance to be used for housing purchases was made. Whilst employees will avail this facility, how many will remember that availing this means they will need to fund for their older age through means other than PF? Many companies are already facilitating some financial advisory access to employees and making financial health a core part of their well-being strategy.
B. Facilitate: Given the right education, employers will create the need from employees to take actions. Employers can help facilitate employees that want to take actions such as promoting voluntary contributions to PF or the National Pension System option. Recent guidelines for portability of Superannuation funds to National Pension system has also been published by the PFRDA.
C. Reward: An employer contribution match concept is frequently used in some countries to incentivize employees to contribute to a retirement plan. Reward good savings behaviour and it can also be a mechanism to reward tenure (instead of those cash/gift based long service awards maybe) or even performance (have employees allocate part of their annual bonuses to a retirement plan). Such types of techniques are seldom used in India.
D. Communicate: Regular communications on demand for employees like statements, projections and wealth type calculators are an important reinforcement of the education. Risks like longevity and inflation require constant reminders and context to ensure people really understand where they are headed and that they are on track to live securely in their older age.
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We always think of India as a young country with demographic dividend. However, let us not forget the law of large numbers. Even a small percentage of senior citizens in India is a very large number. The number is estimated to be over 350 million by 2050!
(The Author is Head of Retirement, South Asia, Willis Towers Watson)