Financial resilience and the role of individuals, employers and government

Employers and governments have a role to play in helping employees boost their financial resilience. That’s one takeaway from Aegon’s Retirement Readiness Survey 2021, The New Social Contract: Future-Proofing Retirement. Many people have had to dip into savings or take out loans over the past two years to stay afloat and navigate the economic volatility the pandemic has created.

Employer support

Beyond a basic salary, which is offered by the great majority of employers (76%), over half (54%) of workers globally say their employers offer some form of medical health insurance, two in five (43%) are offered a pension plan with employer contributions, 41% are offered life insurance, and just over a quarter (26%) are offered a stock purchase plan. Collectively, these benefits offer a toolkit for workers to improve their financial resilience.

Many employees take the leap into savings faster if their employee is proactively encouraging them to do so. For example, among those who are saving or intend to save, two in five (40%) workers globally cite employment reasons as being a factor that prompted them to save.

In fact, 16% were prompted because their employer started paying into a retirement plan, 14% were automatically enrolled into their employer’s plan, and 12% were prompted because their employer offered a matching contribution to their plan.

In terms of other forms of support, the numbers obviously vary depending on the size of the company as larger companies are more prone to offer more benefits and smaller companies rely somewhat on government support.

However, the survey shows that nine in 10 employers have implemented one or more types of support. For example, 59% of employers allow flexible hours, 53% allowed workers to stay remote, 21% covered lost wages during quarantine, 22% provided access to mental health support, 18% increased wages/pay for essential workers and so on.

Government support

Despite retirement responsibility more and more being offloaded onto employees by employers, government also has an important role as part of the three-legged stool of savings.

Globally, 33% believe the government should increase overall funding available for retirement security programs through raising taxes without having to reduce the value of individual payments.

A smaller percentage (18%) of people surveyed believe the government should actually reduce the overall cost of such programs by reducing the value of individual payments without an increase in taxes.

Because the government touches so many aspects of our lives as far as savings go, the report suggests the following recommendations for government programs:

• Ensure sustainability of Social Security benefits
• Provide access to affordable quality health care for people of all ages
• Promote a positive view of aging
• Offer tax incentives
• Incentivize and/or require employers to establish workplace savings plans
• Incentivize and/or support the opportunity for all types of workers to save for retirement
• Reform labor workplace benefit laws
• Incentivize employers, schools and trade groups to provide programs to learn new skills
• Require financial and health literacy in school curricula
• Innovate solutions to make long-term care services and support more affordable
• Provide social security or government credits for unpaid time spent in caregiving roles
• Help individuals age in place by planning infrastructure reforms and fostering innovation and technology

The three-legged stool of savings and retirement only work when all legs are on equal footing and grounded in strong programs. Employers, government and individuals all have a place in that and with a pandemic-tinted vision, new and stronger reforms may take form to aid employees in the long term.