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Retirement is often viewed as a definitive end to one’s working life, but this notion is increasingly becoming outdated. Mercer is committed to dispelling common retirement misconceptions and revealing the complex realities that many individuals face, including the fact that a significant number continue to work well into their retirement years.
The reality of retirement
- A growing need to work: Over 60% of adults believe they will need to work past retirement age and more than 50% feel they may never retire.
- Financial insecurity: 38% of adults lack confidence about their financial security in retirement
- Desire vs reality: While 69% of adults wish to retire before 65, only 34% believe they can achieve this, with younger generations, Gen Z, Millennial, and Gen X, feeling the disparity even more.
- Record employment among seniors: The number of working people aged 65 and above has doubled over the past 25 years.
- Dual income streams: Approximately 2.5 million individuals were receiving both a private pension and a paycheck in 2021/22, with 60% of these individuals aged 55-64 and 20% were in the 65-69 age group.
It’s clear that a significant portion of the adult population in the UK is facing the prospect of working beyond the traditional retirement age not out of choice, but due to insufficient savings.
A crisis of confidence
Australia, which could be seen as slightly ahead of the UK in its journey with defined contribution (DC) pensions, is also grappling with a crisis of confidence regarding retirement savings. A staggering 76% of pre-retirees and 72% of retirees express concerns about their savings lasting throughout retirement, particularly in light of rising living costs. Alarmingly, 51% of those over 60 feel they lack the resources to plan for retirement, and one in five, or around 1.2 million retirees, are unsure where to begin. In response to these challenges and the Quality Advice Review, the Australian Government has expressed its intention to simplify the process for superannuation funds to offer advice to members nearing retirement.
The need for professional advice
This crisis of confidence is not unique to Australia; it resonates strongly in the UK as well. Professional advice is desirable for making informed decisions at retirement, yet many are lacking support. In the UK nearly three-quarters (73%) of individuals in their late 50s have not received any sort of information on pensions or retirement options in the last three years. Worryingly, the majority of DC pots accessed for the first time were accessed by people who had not sought any guidance or advice.
As a global organisation, Mercer is well-positioned to learn from the experiences of clients and colleagues across different regions, including both Australia and the UK. We welcome the UK Government’s initiative to create ‘targeted support’ services as it reflects a growing recognition of the need to assist members as they approach retirement, similar to the approach being proposed in Australia. However, as an industry, the challenge remains for us to consider the necessary changes we must make to ensure advice is both accessible and affordable for all members.
A commitment to empowerment
“The decisions made at retirement can significantly impact years of investment growth, and we take that responsibility seriously.” says Tom Higham, head of engagement at Mercer. “In an increasingly complex landscape, the need for personalised advice and guidance has never been greater. Our goal is to equip our members with the information and guidance they need to make informed choices about their retirement. We aim to provide individuals with the tools and insights necessary to navigate their retirement paths, ensuring they feel secure and prepared for the future.
“Digital advice has the potential to significantly reduce costs and make these services accessible to everyone. The Mercer Master Trust’s Destination Retirement service provides access to advice without any initial fees, and we’ve already seen thousands of members register for it.
“By focusing on personalised engagement and leveraging technological advancements, we can help individuals navigate their retirement planning more effectively. We are developing an AI conversational agent that creates individual interactions, when people want them, about the things that matter to them most. Technology like this doesn’t only open the door for rich, data-driven conversations, but can also help to address gaps in vulnerability, financial literacy, accessibility and language.”
Mercer’s report ‘What’s the Price of Freedom? highlights areas where the industry still falls short of providing members with the advice and guidance they need to feel confident in their retirement planning. It’s clear the notion that retirement signifies a complete exit from the workforce needs to be challenged and we should be aligning our products and services to the changing behaviours of the retiring population. What people truly need is the freedom to choose whether they want to work or not, and that is determined, in no small measure, by their ability to pay for their retirement years.
