The idea of working 9-5 until you receive a gold watch at age 60 is dying out fast. Millennials seem to have the biggest millstone around their neck: a survey of under-35s by Prudential found that over a third of millennials believe that, despite saving as much as they can, they are never going to save enough for a comfortable retirement. The cost of living longer in retirement is pushing the average retirement age higher, and millennials’ struggle to fill their pension pot will lead to them postponing retirement even longer.
Changing generational trends could be affecting productivity in business too. Companies who look closely at their baby-boomer employees’ retirement plans are looking at a perfect storm. Official statistics this year show a record 10.21 million workers aged over 50 in the UK and a huge 38 per cent of the US work force will be over 55 by 2020, according to the US Bureau of Labor statistics. This will lead to a retirement boom in the years that follow.
As the last of the baby-boomers prepare to exit the workplace for the comfort of a retirement that their children can only dream of, they will also take with them a raft of corporate memory. Businesses must prepare hard to preserve this, otherwise those left behind will inherit even greater problems. In other words, workplaces are still facing a retirement time-bomb.
While churn and fresh talent can be good for companies, corporate memory is an overlooked asset. It is not just the hand-over of documents and tasks, but passing on the mission, history and soul of an organisation when the current generation of executives retire. Succession IQ needs to become the new watch-word of today’s leading businesses.
With baby-boomers departing, and millennials far less loyal to the organisations that employ them, there is a need to look at ways to engage talent to keep a level of consistency. The promise of a good pension was once enough to keep employees with companies for many years. Many companies are not in the position to offer the benefits that they used to, but one way they can retain staff in the short term is to offer millennials support in planning their future.
Pensions strikes deep-seated dread into many a young person today. Over half of those surveyed by Prudential expressed a wish for their employer to take more time to explain pensions and benefits, with 16 per cent fearing they could never afford to retire.
Better advice on pension planning could become an increasingly important employee perk, along with bonuses based on experience, tenure and flexible and remote working. The smarter the business, the more they will already be doing to plan for the departure of Generation X employees, to get ahead of ‘handing over’ experience from one generation to the next. Tyre manufacturer Michelin receives high marks here for its mentoring program, encouraging skills- and knowledge-sharing between generations, and for rehiring retirees to manage projects.
A flexible approach to employing older workers is needed in the same way it is needed when employees start families and raise children. Many people approaching retirement age are ready to scale back, but they are not necessarily ready to stop working altogether. A good number remain ambitious about the contribution they can bring to the workplace.
With millennials being the generation most motivated by having ‘purpose’ at work, pensions fears will not mute this trend. But over-50s tended to have a more positive outlook than millennials about their skill-set remaining relevant and their aptitude staying high as they got older. A recent survey by Aviva found that 41 per cent of over-50s were confident about their ability to keep up at work, compared to only 36 per cent of millennials.
There is a glimmer of hope for the younger generation. While they may face the prospect of being poorer than their parents, they also have the opportunity to step into their shoes in the workplace over the next five years and reap the financial gains, as the boomers scale back. Generational exchange is absolutely vital to the long-term health of any business and maintaining generational diversity will make the transition between the generations considerably more straightforward.
The rise in retirement age and the feeling that retirement is aeons away: these both mask a much larger cause of concern: neither businesses nor their employees are doing enough to prepare for retirement. Particularly for companies with a greater range of generations in the workforce and a large number of older workers, the coming retirement boom is a time bomb that it will take time and careful planning to defuse.
Brett Moffatt is Managing Director (EMEA) of Talent Intelligence.