How well prepared are we to sustain ourselves and future generations into old age? A new report from the World Economic Forum (WEF), created in partnership with Mercer — We’ll Live to 100: How Can We Afford It? — reveals that longer life expectancies, shrinking old age dependency ratios, persistently low interest rates and a shifting of the burden from governments and employers to individuals are contributing to a huge and growing gap between long-term savings and the current and future income needs of billions of individuals.
In Mercer’s view, we can meet these challenges and mend the gap — but doing so will take concerted action on the part of all stakeholders, including governments, employers, financial intermediaries and individuals. Bold solutions are needed — and helping to identify those solutions goes to the core of Mercer’s mission to make a difference in the lives of people by advancing their health, wealth and careers.
Fifty years ago, exercising for fitness wasn’t “cool” — and it wasn’t popular. But beginning in the 1970s, a consumer revolution fueled by fitness enthusiasts like Jack LaLanne, Jane Fonda and Richard Simmons and propelled by new technology like videotapes made fitness a part of popular culture. Today, new digital tools like Fitbit have further popularized fitness by harnessing the power of peer pressure and giving users improved access to information and immediate feedback. Measuring performance and wellbeing have never been easier, turning what was otherwise the painful experience of exercising into a positive and engaging one.
A similar revolution is needed to engage individuals in saving for the long term. Just like exercise, saving can be painful, both because it gives individuals more pleasure to consume now than later and because interacting with savings products and financial intermediaries is, at best, complex, confusing and time-consuming and, at worst, expensive or even ruinous. In addition, it is often difficult for individuals to track their progress or know whether they are meeting their goals.
Transforming saving into an engaging consumer experience rather than a financial services experience — presenting it not as something difficult and unpleasant but as achievable and interesting through simplified language, useful tools and the ability to track progress in real time — could create the same explosion in the savings industry that we’ve seen over the past several decades in fitness.
Transforming saving into an engaging consumer experience rather than a financial services experience – presenting it not as something difficult and unpleasant, but as achievable and interesting through simplified language, useful tools and the ability to track progress in real time – could create the same explosion in the savings industry that we’ve seen over the past several decades in fitness.
“We need to unleash some of the creativity of the consumer industry into the financial services industry and develop a ‘carrot’ rather than a ‘stick’ solution to the savings problem,” says Divyesh Hindocha, Partner. “The key is to make the saving experience a positive one for young people. I think that with appropriate marketing and engaging tools, we can elicit game-changing behaviors.”
Although the financial services industry must help lead such a revolution, employers have an absolutely critical role to play given their long history of bringing vetted products and services to their employees — and their ability to do so — as well as their vested interest in easing their employees’ financial worries in order to reap significant productivity gains. Government, too, must help spur the revolution by expanding pension coverage and individuals’ access to savings programs and products. Those that do will be more competitive in attracting both employers and a skilled workforce, generating higher productivity, and lowering the overall burden on the state.
The time to act is now. By applying creative and strategic solutions like this one, we can transform the future reality for individuals and societies. Both government and employers have a critical role to play — and Mercer consultants are currently working with both on forward-thinking solutions to help them mend the gap.