SG employees are concerned about retirement planning. They, after all, rated it as their top priority. Yet, the same Aon research showed that 80% underestimated what they need for retirement.
Part of the problem is not just lacking retirement support from employers. The research “2021 Trends in Retirement & Financial Wellbeing survey for Singapore” highlighted poor transparency in group retirement plans' investment offerings and employees foregoing long-term perspectives to seek short-term gains.
“Employers can have a significant impact on how much their employees save by instilling smart habits and healthy money behaviors. The right long-term savings vehicles, effective communications, and financial tools will help Singapore's workforce be more financially resilient in the wake of the COVID-19 pandemic,” said Ashley Palmer, regional managing partner for retirement and investments in Asia for Aon.
The survey identifies three main themes in financial well-being and retirement support for Singapore employees:
Financial well-being support is the new employee expectation. Close to 40% of employers rank an employee's financial well-being strategy as their highest priority, followed by emotional and mental well-being support. The survey shows that 70% of Singapore employers will formulate or execute financial well-being programs throughout 2021, in line with employee expectations. Companies also view offering a financial well-being program critical in increasing employee engagement and remaining competitive in the talent market.
There is an increasing trend of employer-led supplementary savings plans. Currently, 22% of companies surveyed offer Central Provident Fund (CPF) top-up contributions to citizens and Permanent Residents. But, close to 40% of the working population in Singapore are foreigners who do not have access to CPF. They are likely to have foregone their retirement benefits in their home countries. To bridge this gap and provide equitable retirement benefits to all employee groups, close to 50% of the organizations surveyed offer supplementary retirement benefits to their foreign staff. Financial services firms are leading in this practice, followed by the technology and the healthcare sectors. Promisingly, a third of organizations in Singapore are prioritizing a thorough review of their supplementary retirement arrangements in 2021.
Employees in Singapore lack a well-defined default investment strategy. Less than 30% of the surveyed companies in Singapore currently offer their employees an investment choice in their retirement plans, and only 15% of retirement plans have a default investment fund. It leads to employees selecting their optimal investment funds. They may lack experience in understanding investments, leading to misallocating their money and resulting in inadequate retirement savings or excessive risk-taking.
"Forward-looking companies first need to understand the financial worries of their employees and identify the gaps in their benefits offering. The most effective approaches are aimed at changing individual behaviors towards money and savings and providing accessible programs and vehicles to deliver sustainable change,” said Alicia Brittain, senior consultant and actuary for retirement and investments in Singapore for Aon.
“The key to protecting employees and adding value to savings in any defined contribution retirement plan is a well-defined default investment strategy. This includes frequent performance monitoring, actively managing investment risks, and dynamically reducing investment risk as employees move towards retirement,” she added.
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