If it ain’t broke, as they say, don’t fix it. But global retirement systems definitely are in need of fixes, according to a story by Marlene Y. Satter for benefitspro.com that cites an Ernst & Young report on the state of pensions globally. The article:
“The report, ‘Building a Better Retirement World,’ noted that the aftermath of the global financial crisis created new challenges in efforts to tackle the costs involved with aging and longevity.
“After reviewing 18 pension and retirement markets across the globe, E&Y identified several areas that need to be addressed to better meet the issues facing the retirement industry and retirees. Among them:
“A rebalancing of benefit expectations with financial resources. ‘Expectations of generous retirement and pension benefits that don’t match financial reality, coupled with increasing customer longevity, are increasing retirement and pension fund deficits’, it said. ‘Providers and policymakers must use long-term vision and political discipline to drive tough but necessary pension and retirement reform, such as benefit reductions and ‘outsourcing’ outcome responsibility’.
“Acceptance of a new level of regulation, oversight and transparency. ‘The size of pension markets and their inherent risk to social and economic stability in the post-crisis world require higher levels of political and public scrutiny, regulation and transparency’, E&Y said. ‘This comes with a cost. Providers must ensure their retirement solutions align across multiple jurisdictions and regulations while still supporting sustainable delivery of better retirement outcomes’.
“Simplicity in complex systems. ‘In most markets, pension and retirement systems are overly complicated. For beneficiaries, this complexity reduces confidence and engagement’, the firm said. ‘Few pension systems actively manage this dimension. Simplifying communication, product selection and operations can lead to increased customer confidence, buy-in and engagement’.
“Retirement professionals, the report said, should consider how the banking or securities sectors do business today as they consider whatever reforms are needed.
“E&Y noted that in the U.S., the retirement age for Social Security is likely to go higher, while discussion continues over whether to increase payroll tax contributions or reduce benefits. It also said there is a need for regulations that will simplify auto-enrollment and auto-escalation.”