WHAT’S THE FUTURE OF PENSIONS? NEW TRENDS TO CONSIDER

The future of pensions is top of mind for countless individuals as of late, as the traditional pension model has come under strain due to demographic changes and economic pressures. Doubly so when you consider what’s happening with geopolitics and inflation. Curious to learn more? Here, we run down some of the trends that will inform the future of pensions.

Defined contribution plans, such as 401(k) plans, have become increasingly popular in recent years, as employers shift away from defined benefit plans. These financial products place more responsibility on the individual to save for retirement, but also offer greater flexibility and portability. As the workforce becomes more mobile and individuals take on more responsibility for their retirement savings, we can expect to see defined contribution plans continue to grow in popularity.

Automatic enrollment and escalation are strategies that employers are using to encourage employees to save more for retirement. The former means that employees are automatically enrolled in their employer’s retirement plan, while the latter means that contributions increase automatically over time. These strategies can help increase retirement savings and improve retirement security for employees.

Longevity risk, or the risk of outliving one’s retirement savings, is becoming a growing concern as people live longer too. In fact, many retirees are finding that their savings are not sufficient to support them throughout their retirement. To address this challenge, we can expect to see more products and services that provide retirement income, such as annuities and other forms of guaranteed income.

Financial wellness programs will play a larger role going forward to boot, as employers seek to improve their employees’ financial literacy and overall financial well-being. Offerings here can include education on retirement planning, debt management, and other financial topics. By improving their employees’ financial wellness, employers can help ensure that their employees are better prepared for retirement.

Technology is also proving to be the great transformer as well. Digital tools and platforms can help individuals manage their retirement savings and make more informed decisions. Technology can also help employers improve their retirement plans and provide more personalized services to their employees.