Helping companies and their employees make better decisions for the Maturing Workforce

Emerging mature workforce

The Australian Institute of Health and Welfare (AIHW) released a web report titled Older Australians in 2021 that highlighted an increase in workforce participation among older Australians (aged 56 and above) from 10.6 percent in 2010 to 14.8 percent in 2021^[1]. A similar trend can be seen in the 55-64 age group, where workforce participation increased from 62.6 percent to 67.9 percent over the same time period^[1].

This web report explores how companies are navigating this change, what this means for both the company and retaining more mature employees.

How companies can support employees and prepare adequate labour strategies for an aging workforce

Companies need adequate labour strategies including succession planning and mentoring of younger staff as well as celebrating when people retire.

Employees should consider whether they have the option of a gradual reduction from full-time working arrangements by going part-time, using any accrued long service leave entitlements or having the flexibility of remote working where their occupation allows.

Aon’s Employee Benefits Report 2022 found:

• The majority of organisations (86 percent) have a work from home (WFH) policy and will continue with it^[2].
• 97 percent offer flexible working where the role allows or for senior roles^[2].
• Some organisations are exploring options such as 4-day working weeks, summer/peak hour changes, flexible hours for commuting and rotating office days^[2].

Employee Entitlements

It is important that employees are aware of their entitlements – both while working and when retired. Questions they should be asking include:

• What do they get when they retire?
  • Will their superannuation be adequate and how can they best plan and utilise their superannuation?
  • What unused leave entitlements (annual/long service) are available?
• What do they lose when they leave?
  • Any company private health/life/salary continuance insurance benefits.

Employees also need to be aware of being paid super while taking long service leave while in service (which is a common strategy for teachers, but maybe less known in other occupations).

Empowering the Mature Workforce

Employees should think about what will fund their income in retirement. The most common sources include:

• Superannuation
• Investment property
• Shares/other investments
• Children support
• Part-time work
• Other assets
• Age pension

Superannuation and Financial Wellbeing

The Retirement Income Review found that the superannuation system is expected to mature by 2060, as shown by the increase in expected median superannuation balances for the various cohorts^[3].

Median superannuation balances from 2020 to 2060, by age group (2019 dollars, AWE deflated)^[4]

Results from Aon’s 2022 Financial Wellbeing Survey showed that:

• 67 percent of surveyed companies view super as part of their Employee Value Proposition^[5].
• Only 11 percent of employees know their super very or extremely well, with 14 percent not at all^[5].
• Almost a quarter of employees are not prepared well or even at all, for retirement^[5].

Those looking at retiring in the next 10 to 20 years would not have had the benefit of the full superannuation guarantee for their working lives^[5]. These individuals need to be aware of various contribution strategies so that they can take full advantage of the system to boost their retirement benefit. Strategies include:

• Salary sacrifices or voluntary post-tax contributions while working.
• The ability to make downsizer contributions.
• 3-year bring forward rule on after-tax contributions.
• Ability to contribute to super even if they stop working full-time.

Spending in Retirement

There is an inherent trade-off between spending in pre-retirement versus post-retirement.

There has been research conducted to show that retirees in general do not spend enough, whether during their working lives or in retirement sticking to the minimum withdrawal rates (for account-based pensions from super)^[5].

Individuals should consider their desired spending in retirement, including whether they wish to leave aside funds for children or grandchildren, if they have any. As aged care can be expensive and complex, it is recommended individuals seek professional advice to ensure their goals can be met, particularly on complicated matters.

What can employers do to help their employees make better financial decisions and prepare for their future after they leave the company?

Employers can consider the following actions:

• Provide general financial education to their employees.
• Provide a Financial Wellbeing program.
• Discuss career planning at all stages and encourage planning for retirement early.
• Review the company’s recruitment and placement policies and whether they attract employees of all ages and provide sufficient career development opportunities over an employee’s lifespan.

Aon can assist your business with:

• reviewing your current programs – whether run in-house or by a third party;
• design and run financial wellbeing programs; and
• advice on talent attraction and retention strategies.

Please contact us for more information. 

References
[1] “Employment and work”, Older Australians Employment and Work, Last updated: 30 Nov 2021, https://www.aihw.gov.au/reports/older-people/older-australians/contents/employment-and-work
[2] Aon’s Employee Benefits Report, 2022.
[3] The Retirement Income Review, Superannuation balances at retirement | Treasury Research Institut
[4] The Retirement Income Review, Accumulation of superannuation across a lifetime | Treasury Research Institute
[5] Aon’s 2022 Superannuation and Financial Wellbeing Survey
[6] HILDA Survey, https://melbourneinstitute.unimelb.edu.au/hilda