Big Retirement Readiness Perception Gap Between Employers, Employees

Plan sponsors significantly overestimate participant retirement readiness, at least according to Voya.

The firm found a gap between participant feelings versus plan sponsor perceptions when it comes to retirement readiness, where a strong majority (87%) of plan sponsors say their participants are somewhat or very prepared for retirement while only 63% of participants feel the same way.
Sponsors' top concerns were to ensure that their plans comply with new regulations and that their participants are properly invested.

Reducing plan fees and expenses has also been a recurrent focus that has grown in significance since Voya’s previous 2021 survey, moving from fifth place to third place. Cybersecurity is also a key concern for plan sponsors.

Turning to the impact of markets, more than half of the participants surveyed reported that inflation and the state of the economy will have a severe or major impact on their ability to save for retirement, while COVID-19 was much less frequently cited as an obstacle to retirement savings.

Fully 37% of participants over age 50 said that they are now planning to retire later than originally hoped due to the long-term effects of market volatility, inflation and COVID. When sponsors were asked for their views on the top long-term combined effects of recent market volatility, rising inflation and COVID on retirement plans and employee benefits, they cited an increase in participant investment changes and higher demand for emergency savings benefits as top impacts.

The research also revealed that retirement preparedness has a direct impact on an individual's overall financial confidence. It uncovered an opportunity for plan sponsors and specialists to offer more education and solutions when it comes to generating income and becoming prepared in retirement.

“This is relevant as nearly 90% of participants said they are somewhat or very interested in retirement income solutions and an investment option which helps provide income during retirement (87%) and help to understand how to generate income in retirement so that they can maintain their current lifestyle (87%),” the company said.

An opportunity exists for specialists and sponsors to boost guidance and education to improve outcomes.

Participants' interest in several products and services (including support for transition to retirement, auto features and support for caregivers) indicates that there is demand for additional decision support for retirement planning and is also an opportunity for sponsors and specialists to adopt and promote these services within their retirement plan features to help drive greater financial outcomes for participants.

It's even more important for the role of the employer as a majority (82%) of participants trust the retirement planning services offered to them by their employer and are confident that the retirement plan offered through their employer will help them achieve their retirement goals.

In addition, 87% are also more likely to stay with their employer if they offer competitive retirement planning services and products.