Reimagining work and retirement  

A massive demographic shift is underway, and it presents a huge challenge for employers as they seek ways to realign working practices and ‘retirement’ with the new reality of what workforces want.

Mercer’s latest Global Talent Trends data shows that just 16% of employees - down from 25% just three years ago – intend to stop working completely at retirement age. A massive 84% anticipate continuing to work, in some cases reducing hours, phasing into retirement, or simply playing it by ear. The data reveals that many employees want to stay in work to keep their mental agility, fill their time or maintain a sense of purpose, but it is not all about lifestyle choices: almost two-fifths (38%) are driven by financial concerns.

Indeed, Mercer is working with the World Economic Forum (WEF) to address the issue of financial resilience for our rapidly ageing global population, and it was one of the subjects under discussion at the 2022 WEF summit in Davos.

Flexibility at work is quickly becoming a staple of modern working life.  Flexible employment arrangements are now a key part of supporting workforce wellbeing and engagement, as highlighted by the Covid-19 pandemic.

Flexibility in how we retire as well as how we work is also becoming an increasingly important issue.  Managing retirement needs in a workforce has traditionally been a relatively straightforward exercise:  employers knew that employees could remain in the organisation until they reached retirement age, at which point they would leave and draw down their occupational and State pension.  For many employees, retirement was an important and long-anticipated goal.

In Ireland, these norms are changing.

•  For employees, being financially able to retire is being put into sharp focus by cost of living considerations and a realisation that pension benefits may not be sufficient to provide an adequate retirement income.
• For employers, it is becoming increasingly more difficult to avoid age discrimination issues – employers cannot enforce contractual retirement ages without a clear objective justification.
• But perhaps most importantly, the government has also indicated that it is moving towards promoting a more flexible retirement environment, recently announcing measures to come into force in 2024 that would give employees the legal right to continue working until the current State pension age of 66, as well as the option to work beyond State pension age and receive a higher State pension.

These factors are all contributing to the growing trend of employees looking to work for longer and to have more flexible retirement arrangements.  Employers are having to consider not just how they deal with requests from employees to work for longer but also what implications this might have for staff policies, employee benefit programmes, and even how workforces and workplaces might need to be adapted to accommodate this.

Understanding how, or whether, to accommodate older workers in the workplace is vital.  We believe that where an employer is properly age-ready, it will be able to:

• Develop and operate a suitable flexible retirement policy
• Ensure that benefit programmes are fit for purpose
• Maximise operational effectiveness and capitalise on the experience provided by older workers
• Increase knowledge-sharing and strengthen collaboration among workers
• Ensure fairness, equity and inclusivity across the workforce, and potentially avoid litigation risks
• Better align the workforce with the future needs of the business

It is also vital that employment benefit programmes are flexible enough to accommodate and be consistent with the employer’s policy.

For example, in many cases, pension and death benefit schemes continue to operate in accordance with a conventional retirement age of 65 which is increasingly out of line with employment practices.

Also, schemes may not be properly optimised to take account of the various options that may be available to employees in relation to accessing or deferring payment of retirement benefits.

Insured benefits are also a significant consideration, for example, is it possible to extend income protection or death benefits to older workers?

• Do you have many employees who are approaching their existing retirement age in your organisation over the next 5 to 10 years?  
• Do you have existing policies on longer working and flexible retirement?  Are those policies clear?  Do you have appropriate communication strategies in place?
• Have you analysed the extent to which your benefits packages, particularly your pension plan and risk benefits, might be impacted by your approach to longer working?
• Do you know the extent to which your approach to longer working is aligned with other employers in your sector?
• Have you ever considered how the skills and experiences of older workers could or should be used in your organisation?
• Have you considered the wider workforce planning issues that will arise where you accommodate older employees in the workplace?