Post on 24-Aug-2020
MERCERREWARDSFORUM
Melbourne, Wednesday 9 AprilSydney, Thursday 10 April
APRIL 2014
RIDING THE WAVE OF THEDEMOGRAPHIC SHIFT
MERCER REWARDS FORUM
Dr David Knox Garry AdamsSenior Partner Partner
LONGER LIVES AND OUR WORKFORCE
LIFE EXPECTANCY FOR THE BABY BOOMER BORN IN 1950
0102030405060708090
100
Male Female
Age 66.1 70.6
Source: Mercer
LIFE EXPECTANCY FOR THE BABY BOOMER BORN IN 1950
Now let’s assume our baby boomers know they are going to make it to 65…
0102030405060708090
100
Male Female
Source: Mercer
Age
+11.2 +8.8
66.1 70.6
77.3 79.4
LIFE EXPECTANCY FOR THE BABY BOOMER BORN IN 1950
Now it’s 2015 and they have actually made it to age 65…
0102030405060708090
100
Male Female
Age
+11.2 +8.8
83.5 86.6
66.1 70.6
+6.3 +7.2
Source: Mercer
LIFE EXPECTANCY FOR THE BABY BOOMER BORN IN 1950
But wait! They’re a white collar professional…
0102030405060708090
100
Male Female
Age
+11.2 +8.8
86.1 88.4
66.1 70.6
+6.3 +7.2+2.6 +1.8
Source: Mercer
LIFE EXPECTANCY FOR THE BABY BOOMER BORN IN 1950
And as long as we’re alive, there is more improvement to come!
0102030405060708090
100
Male Female
Age
+11.2 +8.8
88.2 89.9
66.1 70.6
+6.3 +7.2+2.6 +1.8+2.1 +1.5
Source: Mercer
WHEN ARE YOU GOING TO DIE?
It’s as uncertain as the markets!
65 66 67 68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 100
101
102
103
104
105
Age of death
Source: Mercer
OUR POPULATION IN 2006
0.0%
0.2%
0.4%
0.6%
0.8%
1.0%
1.2%
1.4%
1.6%
1.8%
0 2 4 6 8 10 12 14 16 18 20 22 24 26 28 30 32 34 36 38 40 42 44 46 48 50 52 54 56 58 60 62 64 66 68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 100
THE CHANGES IN 40 YEARS
0.0%
0.2%
0.4%
0.6%
0.8%
1.0%
1.2%
1.4%
1.6%
1.8%
0 2 4 6 8 10 12 14 16 18 20 22 24 26 28 30 32 34 36 38 40 42 44 46 48 50 52 54 56 58 60 62 64 66 68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 100
2006 2046
PARTICIPATION AND POPULATION SHARES
RATIO OF WORKERS TO ELDERS
0
0.5
1
1.5
2
2.5
3
3.5
4
4.5
520
12
2014
2016
2018
2020
2022
2024
2026
2028
2030
2032
2034
2036
2038
2040
2042
2044
2046
2048
2050
ratio
ofw
orke
rsto
elde
rs
yearSource: IGR
RATIO OF WORKERS TO ELDERS– A SOLUTION?
57
67
77
87
0
0.5
1
1.5
2
2.5
3
3.5
4
4.5
5
assu
med
retir
emen
tage
ratio
ofw
orke
rsto
elde
rs
year
retirement age IGR response
RETIREMENT AGE IS BECOMING CRITICALARE YOUR EMPLOYEES READY TO RETIRE?
RETIREMENT READINESS REPORT
• Compare your fund with others
• Compare your fund over time
• Identify stronger and weaker readiness among different membership segments
• Measure the effectiveness of marketing campaigns
• Report progress to members
DEMOGRAPHIC TRENDS SUMMARY
• People are living longer
• They enjoy better health and well-being
• Many are concerned about the adequacy of their retirement savings
• Government is concerned about impact on retirement funding and willprogressively raise the pension age
• More employees will stay at work longer
SO WHAT DOES THIS MEANFOR ORGANISATIONS?
LIVING LONGER, WORKING LONGER
20 35 50 9565 80
CareerChildhood ActiveRetirement Old AgeCareer
Preparation
CareerChildhood CareerPrep
ActiveRetirement Old Age
Flexible, ActiveEngagement
Traditional Retirement Model
• Work full-time to retirementage
• Retire
• Stop work
Transition to Retirement Model
• Phase-down in final yearsthrough part-time work
• Transition to Retirementmaintains net income
Future Model
• Continued active participationin paid work
• Flexible forms of engagementevolving over time
A PROPOSITION, AND SOME QUESTIONS
Most organizations have not focused their thinking about the organizationimplications of employees extending their retirement age
If employees are / will be staying at work longer:
• What impact will this have on talent pipelines?
• How do we manage the late career employee?
• Are there opportunities for different forms of engagement?
• What implications does this have for remuneration strategies?
WHO HAS A STAKE IN THIS?
Theorganisation
Senioremployees
Otheremployees
IMPACT ON TALENT PIPELINES
• Has our succession planning taken likely retirement timeframes into account?
• How do we ensure continued movement through our talent pipelines?
• Will senior employees staying in their current jobs limit opportunities for our highpotentials to move up?
• Are there opportunities for different types of roles for senior employees that will addvalue to the organization and un-block Talent pipelines?
MANAGING THE LATE CAREER EMPLOYEE
• Identifying/exploring the drivers of motivation and engagement– Can’t afford to retire– Not prepared for retirement– Continuing desire to contribute– Power and influence– Autonomy– Mastery– Legacy
• Winning in the “3rd quarter”– Understanding what winning looks like - for the individual, for the firm– Designing the role and form of engagement to meet these needs
FLEXIBLE FORMS OF ENGAGEMENT
• Differing forms of engagement to meet differing needs
• Single employer versus portfolio career options
• Innovating/adapting job design to enable more flexible engagement
• Evolving forms along the way
Full-time Permanentpart-time Part-year Contingent
REWARD STRATEGIES
• Do your reward systems impede the shift to more flexible engagement?
• Transition to retirement strategies
• Aligning reward strategies with targeted retirement dates– Pay particular attention to STI deferrals and LTI vesting– Be prepared to individualise the plans to achieve mutual objectives
SUMMARY
• Understand your workforce demographics and age profile
• Understand their ‘Retirement Readiness’ – financial and personalobjectives
• Map your talent pipelines – scan for succession risk and flight risk
• Consider flexible forms of engagement
• Align reward strategies with intended retirement age
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