Our thinking

Pensions make good (business) sense

1 March, 2024

In a world beset by economic uncertainties, the haunting question of whether employees can afford a dignified retired life echoes through the corporate corridors. A recent Financial Times article delves into this quandary, highlighting the alarming gap between what individuals’ need in retirement and what they actually have.

The article underscores the stark reality that many, despite years of work, find themselves ill-prepared for retirement as pension plans erode and social security systems strain. In response,  IBM has reopened its long-closed pension benefit plan to new participants, and other American companies are considering following suit. This change is in part the result of the way the increase in interest rates has sharply reduced the estimated cost of providing future payments, leaving many plans with a surplus. Given this can only be used for pension benefits, it makes sense to open the plans to new participants.

The article ends with the following thought: “Providing better retirement options makes good business sense.” We couldn’t agree more. While it would be nice to think that this change was driven by this belief, rather than (or perhaps alongside) the unexpected upturn associated with interest rate fluctuation, the sentiment still holds.  As ever, it’s the most fundamental aspects of employee remuneration and support that matter most, and this serves as a reminder that the commitment to employee well-being extends beyond the confines of the workplace. It’s an acknowledgment that success is not solely measured in profit margins but in the quality of life afforded to those who contribute to that success.

It is a depressing reality that at the moment, a comfortable retirement feels like a distant dream, and not just in the States but elsewhere too.  Businesses can, and in our view should, take responsibility for changing that.

By Flora Gicquel