While Belgian employers believe that their pension plans will deliver the anticipated target levels of income for full-career employees in their retirement, recent survey findings show that they will be disappointed. While some employers recognize this, and know that this lower than expected retirement benefit outcome may force employees to delay retirement, findings also show that most have never reassessed their target benefit replacement ratios.
The main findings of Watson Wyatt’s Defined Contribution and Cash Balance Plans Survey are as follows:
- While most employers believe that employee retirement income will reach 70 percent of their final salary, for most employees in Belgium who retire at age 60, total retirement income will barely amount to 50 percent of their final salary. Retirees at age 65 may see income reach 58 percent of final salary.
- The growth in defined contribution (DC) plans means that they can be expected to surpass defined benefit (DB) plans in number in the next 5 to 6 years. Alongside this growth, however, are concerns that not only will DC pensions fail to deliver adequate retirement income for a significant proportion of retirees, but global experience indicates that they may also bring inadequate savings rates, low employee engagement and a lack of appropriate governance.
- Additional concerns stem from the lack of employee engagement on the changing pension environment and poor standards of pension governance. Around 32 percent of employers indicate that their employees have an insufficient understanding of their pension plan, particularly as to risk and effective use of investment opportunities. The majority of DB/DC plans do not have a governance body or plans to introduce one.
The Watson Wyatt Defined Contribution and Cash Balance Plans Survey included 45 employers and 61 plans. Approximately 40 percent of companies surveyed have more than 250 employees.