Tackling the global retirement benefits challenge

Insights from a global dialogue with senior executives of multinational companies

About the report

Why are retirement and pensions issues so challenging? Why is it that market-leading employers haven’t been able to tackle and resolve their issues in this space, despite in some cases decades of effort? And are the problems solvable or are they here to stay?

We spoke to leaders and decision makers at 30 major companies with pension commitments spanning more than 80 countries and territories and around $700 billion of defined benefit obligations to find out how they are addressing these issues.

Companies have an opportunity to get this right for the next generations, but they need to understand what role they will play and how to execute this in the new and changing employment landscape.

Raj Mody, Partner, PwC UK

Five key findings from our conversations with business leaders

Employers are willing to spend a significant amount of time and money (well beyond the statutory minimum) on retirement provision in the belief that it is a key part of overall remuneration. None of the companies we spoke with had a strict global policy of doing just the minimum required when it comes to retirement provision.

What employers want to avoid are the financial risks and legacy liabilities that are often created with retirement provision. Pension costs and the risk of unaffordable liabilities are still seen as major challenges, as they were in our 2014 survey. Companies feel the impact in financial reporting, M&A activity, dividend payments and debt levels.

To prevent a future crisis, employers are taking actions to assist today’s employees to save for retirement as well as managing employer-provided retirement provisions. However, most are not sure how to do both in a comprehensive and coordinated way that meets the company’s overall pension funding strategy.

Most companies doubt whether their advisers fully understand the unique requirements of their business and therefore whether they are adding sufficient value. Such doubts should lead to a “question everything” approach to all adviser spending: only holistic advice that looks at the entire retirement picture in the context of the overall business strategy provides real value.

Plan governance is not always where it should be and many employers feel that more needs to be done in this area to avoid any internal conflicts and legal or regulatory problems. A keen focus on the overall objectives of the company for its retirement provision means there is no one-size-fits-all approach for the right governance. Central will be the nature of the business and how labour-intensive it is or has been in the past.