Reimagining work and retirement 

close-up candid office worker

05 February 2023

Between 2015 and 2050, the global population of those aged 60 plus will almost double. Increasing numbers of people are living up to 30 years longer than previous generations – and they are looking for a different later life too.

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.

Employers have a pivotal role to play

This is a big, complex issue, but employers have a pivotal role to play in the evolution of a more flexible, inclusive, and effective older workforce, in several ways.
  1. “Living pensions” 

    As we have just seen, 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. 

    So, 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. 

  2. Are older workers less productive?

    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, 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.

  3. Rethinking retirement

    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. 

    Companies have been adopting a range of successful solutions, particularly post-pandemic. Mercer’s data shows the three most popular are the creation of new employment options for older workers; part-time, flexible, or phased retirement choices; and building a pool of retiree freelance talent. 

    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. 

    There is a clear business case to make for retaining an experienced workforce; and an equally compelling argument from the employees’ perspective. There are no ‘one-size-fits-all’ answers, but lots of good options – it is a matter of finding the right solution for your organisation.

Rick Guzzo

Partner, US, Mercer

Andrzej Narkiewicz

Partner, Poland, Mercer Marsh Benefits

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