With the Union Government initiative to lead India towards being a pensioned society, Willis Towers Watson, a consulting firm, conducted a survey to understand the current thinking of employers towards helping their employees plan for retirement. The survey was conducted across sectors from April to May 2016 and drew responses from 118 companies.
The study shows that 70% employers think that the current retirement benefits are insufficient to meet retirement goals.
EPF vs. NPS
The study shows that Employee Provident Fund (EPF) and National Pension System (NPS) are seen as strong pillars in supporting retirement goals. 59% of employers surveyed suggest widening the scope of EPF whereas 67% suggest making NPS compulsory.
Also, 57% respondents say that employees should be given an option to choose between EPF and NPS and 54% suggest merging the two. The report says that while EPF and NPS were designed for fundamentally distinct purposes, employees are still unaware and this signals a need for greater employee awareness around leveraging EPF and NPS for improved retirement adequacy.
Preference for NPS
According to the survey, around one third of the respondents said they offer NPS to their employees and the remaining 70% of those not offering NPS, will offer it in the near future. Among the employers who are offering include NPS as a part of CTC (cost to company) whereas 17% provide it as an additional benefit.
Among the top challenges in rolling out Corporate NPS, 72% consider project planning and selecting points of purchase (POPs) as a challenge. POP is an entity that sells pension products to subscribers. These entities act as collection points and extend a number of customer services to NPS subscribers, including requests for withdrawal from NPS. Almost all banks, both private and public sector and a majority of stock broking firms are NPS POPs.
Another 51% feel that employee awareness regarding NPS is still lacking and thus they are reluctant to invest.
Increase in employee participation
The report says, “Employers need to educate employees and provide suitable retirement benefit options to help secure their financial future. The research indicates that, largely, employees are fine with their employers playing an active role in supporting financial security goals through communication and vendor facilitation.”
It has also suggested that NPS will play a pivotal role in driving retirement adequacy and it is the responsibility of the employers to improve their overall understanding of the product, assess employee requirements and identify specialised assistance requirements for a smooth roll out.
What can advisers do? They can tie-up with the organisations and conduct financial wellness programs for the employees that can educate them about savings and investments. In 2015, 41% of employers collaborated with advisers to promote financial education - a trend that is expected to grow to 77% by 2018.