2/9/2009
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Employers will play an increasingly critical role across the globe in shaping public policy and addressing concerns over pension benefit costs, as the ratio of elderly persons to the working-age population rockets over the coming years, warns Mercer.
The World Economic Forum, in association with Mercer and the Organisation for Economic Cooperation and Development (OECD), has published Transforming Pensions and Healthcare in a Rapidly Ageing World: Opportunities and Collaboration Strategies, addressing the need for strategic thinking from employers and policymakers.
"The report makes a compelling case for immediate and collaborative action by the private and public sectors," explained M. Michele Burns, chairman and chief executive officer of Mercer. "Even more impressive, the analysis sets out a pragmatic blueprint for transformation, by identifying the most promising strategies and providing key scenarios of the future against which to consider the effectiveness of each. The key strategies range from the now existing, but underappreciated, to new and highly innovative options that merit serious consideration."
In conjunction with the report, Mercer has published a special Perspective paper, in which its experts draw upon practical experience consulting in retirement, healthcare and workforce managements.
The conclusions drawn from the report are that defined benefit (DB) plans must address fund performance relative to liabilities. Timeframes for making decisions on this are, Mercer said, shrinking at the same time that strategic investment decisions have become more complex. The financial consultant recommended that governing fiduciaries consider delegation to professionals whose only objective is to maximise returns and avoid unnecessary risks.
In terms of defined contribution (DC) pensions, Mercer is concerned that too few plan members actually understand their own objectives and needs, and often fail to correctly choose and update their investment options. Mercer said decision-making should be simplified and made less frequent, and that contributions should be affordable to encourage lower-paid employees to look at joining a scheme.
"At a time when recovery from the recent economic turmoil places pressure on already-stretched resources, this research provides global leaders with a powerful decision-making framework for evaluating and prioritising alternative pensions and healthcare financing strategies. Employers, providers and governments will need to collaborate in new ways to meet the challenge identified by this research. In particular, the massive challenge we face of financing pensions and healthcare during the unprecedented ageing of societies requires collaborative intervention at earlier stages in life and not only near or at retirement age. This research is a clear call for strategic thinking by global leaders reviewing their pension and healthcare agendas. Mercer intends to continue to work in partnership with many major employers to seek out effective innovation and practical solutions in these areas," added Burns.
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