To address the long-term savings gap, stakeholders such as government and employers have a vital role to play in financial product design, according to Mercer.
A new Mercer report, titled Bold Ideas for Mending the Long-Term Savings Gap, presents four notions on reducing the savings gap, one of which stresses that “governments and employers have an important role to play” in assisting individuals’ recognition of "good" advice, products and services.
According to the paper, improving consumers’ financial literacy is not enough, as “knowledge by itself rarely translates into action”.
“What does spur action is giving individuals access to smart tools, default options and guidance that can help them achieve success,” the paper said.
Both governments and employer stakeholders have “much greater capacity” than individuals to assess and provide information to differentiate between various financial intermediaries.
In return, governments and employers would enjoy more financially secure and productive employees.
“This involvement will help create a virtuous circle that rewards quality financial intermediaries and products, penalises practitioners of ‘churn and burn’, increase trust and creates a greater appetite among individuals for appropriate levels of risk to build sufficient savings,” the paper said.
Bold Ideas for Mending the Long-Term Savings Gap aims to address the challenges of bridging the long-term savings gap created by factors such as higher life expectancies across the globe that are failing to be addressed by set retirement ages.
Such changing social realities have rendered the current framework of laws and regulations “woefully inadequate,” leaving ageing populations financially insecure with insufficient pension systems.
Other “bold ideas” outlined in the paper involve “transforming saving into an engaging consumer experience” rather than something difficult or unpleasant; employing “intelligent design principles” to create better retirement outcomes for individuals; and reframing the structural issues and expectations of work and retirement, such as working later into life.