Reimaging work and retirement 

As stated above, one of the key factors in people’s decision to continue working is the inadequate provision in retirement. In too many countries worldwide, including many developed economies, the average pension is way below the benchmark of around 65-80% of pre-retirement earnings recommended to maintain living standards in retirement. It is a particular problem for women, who both earn and save less in their working lives.

The trouble is that there are many variables shaping household retirement income and what counts as an adequate pension, and these will differ hugely between and within countries.

Our research found that in 2022, only 25% of companies either currently offer or plan to offer living pensions for different populations. While employers have become increasingly interested in establishing fair pension parameters, in practice they can find it notoriously difficult to establish what a living pension should look like for their people. To that end, Mercer has designed a methodology to explore basic, minimum, and comfortable levels of pension to help organisations define their corporate perception of a living pension for employees.

It is a key question for organisations faced with the realities of an ageing workforce: more experienced workers cost more, but do they justify that cost in terms of productivity?

Subjective performance reviews universally tend to rate older employees less highly than younger ones. But Mercer’s recently published research, Age, Experience, and Business Performance: A Meta-Analysis of Work Unit-Level Effects, looking at objective measures of performance – financial indicators, operational effectiveness, and customer referrals/retention – finds the picture is a more nuanced one.

The research differentiated between age, which reflects years of total work experience and tenure, reflecting the number of years of experience with that specific employer.

On average, worker age has no impact on any of the three business performance measures analysed. But as employees’ average tenure rises, both financial and operational business results improve. Moreover, work groups with a diverse mix of ages do just as well as those comprised of similar-age employees.

The message is clear: older workers are not less productive, and they do not hold back age-diverse groups, while longstanding employees typically add value through their expertise and experience, despite their higher cost.

It follows those employers who work to retain their older, tenured workers through flexible-work and phased-retirement arrangements can capitalise on their valuable attributes. In fact, according to Global Talent Trends data, companies that expect their workforce to be energised are twice as likely to plan to offer phased retirement options.

Companies have been adopting a range of successful solutions, particularly post-pandemic. Mercer’s data shows the three most popular are: enabling employees to adapt their retirement benefits to meet different personal circumstances (39%), proactively offering older workers different employment options like project-based roles, gig, etc. (38%) and offering part-time, flexible, or phased retirement choices (36%).

Again, this is a complex and nuanced exercise. We have worked closely with the WEF to create a 10-factor framework that helps companies establish their parameters for an effective later-life working programme.

A couple of examples help give some idea of the breadth of responses among companies.

Insurer Swiss Re, faced with a third of its staff heading for retirement in the next decade, has introduced a range of flexible options for all staff, not just older workers. It has been a considerable success, boosting the company’s reputation as a great place to work, increasing employee retention, and enhancing productivity.

Unilever’s U-Work model takes a different tack, involving a new contract with employees; it features a guaranteed retainer for minimum hours, with huge flexibility in work patterns, terms, and benefits around that core.