This paper demonstrates that an excise tax on plans with higher premiums would impact not only those employer plans with generous benefits, but also less generous plans covering high risk groups or groups in high cost geographic areas.
This paper examines the administrative, tax and regulatory issues employers that offer domestic partner health coverage must address.
Watson Wyatt's Global Investment Committee discusses global investment grade credit markets.
Watson Wyatt's Global Investment Committee outlines the outlook for developed world inflation – including the many different economic and policy factors that will affect the path and volatility of inflation in the short and long term.
Watson Wyatt's quarterly Capital Markets Review provides a high level summary of capital market results and economic developments.
In this paper we outline our views on the often complex fee structures involved when investing in infrastructure.
The last decade has been a tumultuous one for employers. Against a backdrop of market bubbles and crashes, two recessions and rising health care expenses, companies have made changes to their retirement programs to mitigate risk and manage costs. Some have shifted risk to their workers by transitioning from defined benefit (DB) to defined contribution (DC) plans. Many have reduced the retirement benefits they provide. If corporate America's commitment to workers' retirement plans continues to decline at the pace it has over the past decade, we could see retirement straits in the future that negatively affect employers and employees alike.
Defined contribution (DC) has rapidly become the dominant structure for private sector pension schemes in the UK and has recently been stress-tested as never before. With DC poised to grow at an accelerated rate and as generations of employees become increasingly reliant on DC for their retirement security, people are beginning to question whether DC, as it exists today, is up to the job. What can be done to ensure that, going forward, DC is fit for purpose. This thought piece, which will be of interest to employers, fiduciaries, providers and advisers, looks at all aspects of a DC plan and examines whether they are suitable given the sums now committed to DC.
Watson Wyatt research shows that employee engagement is a leading indicator of a company’s financial performance. Employees who are highly engaged tend to perform at higher levels and be more productive, driving corporate success. And, compared with other workers, highly engaged employees are five times as likely to believe passionately in what their organization stands for in the marketplace.
Given the direct impact of your sales force on top-line performance, keeping sales employees engaged is the key to achieving business objectives. But what factors motivate them? And how can you ensure your human capital programs are supporting the commitment and performance of your sales professionals?
Using insights from the Asia-Pacific version of Watson Wyatt’s global employee attitude research, we will explore what drives sales employee engagement and suggests ways to optimize sales force effectiveness.
The recession of 2008/2009 has forced many companies to re-examine their talent management approach. This paper discusses five new rules to help employers refocus and invest differently.
In the current economic environment, we have seen a number of managers that generally have strong long-term track records produce performance that is way off-scale. Some underperformance has even been more than two times the expected tracking error. In this paper, we seek to answer the question: At what point are the results so bad that institutional investors should fire their managers?
Sales compensation is one of the most valuable tools an organization can use to drive behavior and communicate expectations to the sales force. Sales organizations can benefit greatly by having HR involved in the design and implementation of the sales compensation programs. The current economic environment has made the need for HR involvement in the sales compensation design even stronger.
This publication looks at how GGS can add significant value to an organisation's job levelling process.
Over the coming decades migration rates are not expected to compensate for the negative effect of low fertility rates in Germany. The size of the population and its workforce supply, particularly in terms of skilled workers, will decline. This might affect companies recruiting in the German labour market. Based on the current demographic scenario, and using dynamic models, the population with tertiary education in Germany could decline by 650,000 over the next four decades.
Watson Wyatt’s quarterly Capital Markets Review provides a high level summary of capital market results and economic developments.
Executive Summary
Authors Steven Nyce and Sylvester Schieber conclude that if we expand health insurance coverage without controlling costs, we have the potential to soak up future wage growth and crowd out retirement benefits.
The current economic crisis has created new pressures from Congress, regulators and shareholders for companies to examine the impact of their executive compensation programs on corporate risk taking. Directors need to design an executive compensation architecture that balances the need to promote more effective risk management with incentives to deliver superior shareholder returns. Unfortunately, the conventional wisdom many companies are relying on to make these decisions is flawed and could lead to lower shareholder returns without significantly improving risk management.
An update of our 2006 macroeconomic review reveals a much changed world, in which increased uncertainty and complexity shape our investment views.
The CFO Forum (a group of major European insurers) recently announced that it will delay requiring its members to use Market-Consistent Embedded Value (MCEV) for reporting purposes until 2011, and that significant amendments to the principles will likely be made before that time. This decision reflects how the debate over insurance companies moving to a full fair value mark-to-market reporting regimen — such as MCEV — has intensified. Supporters of fair value argue that mark-to-market measures better reflect the values of assets and liabilities on balance sheets, thus giving investors and regulators more insight into a company’s risk profile. Critics of fair value, on the other hand, argue that it leads to excessive and artificial volatility, which was an exacerbating factor in the economic crisis. This Watson Wyatt article examines some of the shortcomings of MCEV reporting as it is currently constructed – particularly in periods of heightened volatility – and recommends some improvements that the CFO Forum is likely to consider.
An uncertain economy combined with a rapidly changing legal, regulatory and political environment is causing heightened risk in defined contribution plans. Watson Wyatt suggests specific practices for managing fiduciary liability and optimizing plan value for participants.
Public pension schemes are most often discussed from a social welfare and public policy point of view. Nevertheless, the design of public pensions should also be taken into close consideration by companies planning and designing private pension plans for their employees. Social security and private pensions are both very important parts of retirement resources for the vast majority of the population and the adequacy of these resources thus depends not only on the generosity of social security but also on the financial commitment employers choose to make to private arrangements. In this sense, private pensions come to complement social security benefits and, in many cases, they are either explicitly or implicitly integrated with public provision.
In many countries, private pension designers consider projected social security benefits and contributions when defining their overall benefit strategy. It is vital, nevertheless, that more employers take into account the specificities of first pillar pensions in each country so as to develop benefit packages that complement social security benefits effectively.
Accordingly, in the following paper we will examine and analyze social security systems across eight developed nations (Canada, France, Germany, Italy, Japan, Netherlands, UK and US). We have based our comparison on three key aspects: the generosity of state benefits; whether the focus rests on the insurance or redistributive role of social security; and the long-term sustainability of public pensions. We will show that the way in which these aspects are defined and interact have different implications in terms of how companies plan and design the retirement benefits offered to employees.
As the recession continues, the nature of the bonus culture is under increasing scrutiny. This paper looks at how organisations can prevent a culture of 'rewarding for failure' by differentiating between their high and low performers whilst still maintaining levels of engagement.
Watson Wyatt’s quarterly Capital Markets Review provides a high level summary of capital market results and economic developments.
Active investment managers are facing increasing pressures on profitability. Absent a strong market rebound, there will most likely be a considerable amount of change among asset management organizations – consequently disrupting asset owners' portfolios. We suggest some action steps to prepare for such an eventuality.
The credit crisis of 2008 brought upheaval to the usual tranquility of the stable value market. Currently there are quite a few visible signs of wider systemic changes. Watson Wyatt has devoted substantial thinking to the issues facing stable value funds and suggests eight action steps defined contribution fiduciaries can take.
Target-date funds are now broadly recognized as the best investment choice for most defined contribution (DC) plan participants. This significant development in DC investment option architecture is leading many sponsors to ask, "How do we evaluate whether these complex investment portfolios, that combine broad asset class diversification and asset allocation advice, are on track to deliver retirement security?"
In turbulent times, much like the present, DC plan fiduciaries often review the elements of their retirement programs. This paper discusses the two key issues fiduciaries should consider during such a review.
In these uncertain times, when businesses must keep a sharp eye on costs and do more with resources, focusing HR on those activities that drive business value is critically important. Find out five things your organization can do now to ensure that you maintain the balance between achieving short-term cost savings and building long-term competitive advantage.
Integrated reward and talent management is a new way of working for HR professionals. By working across operational divides instead of within silo-based units, HR can create joined up and holistic solutions that are aligned to the organisations goals.
Job architecture can help bring order out of chaos. It provides a disciplined and structured, business-led view of the organisation which can then act as an input and foundation to a whole raft of different interventions, be those restructuring or investments in reward and talent programmes.
The growth of defined contribution (DC) plans is one of the most significant developments in the pension world. As DC plans continue to grow in prominence and size, solutions that were once considered optimal when DC plans were smaller and secondary to defined benefit plans no longer satisfy the needs of plan sponsors and participants. To this end, many institutional investors have begun to explore alternative investments strategies such as separate accounts.
This brief provides an overview of the most important features of active-extension portfolios to help investors begin to determine if this approach is suitable for their organization's governance structure.
Investment managers have been very busy developing new products to respond to plan sponsors’ needs for increased return. The speed with which they have moved is a direct reflection of their motivation: obtaining higher fees. One of the most recent trends in product development is the long/short strategy
To cope with what many economic forecasters are expecting to be a very deep recession, most organizations are re-evaluating their HR programs and policies, with an emphasis on cutting costs. Many of these organizations are taking actions that have substantial long-term implications, such as layoffs or restructuring. Others are cutting back salaries and wages across the board to avoid layoffs, trying to preserve headcount as much as possible.
This paper explores the various routes open to companies when reviewing executive share incentive arrangements during ressionary times.
This research paper examines how remuneration committees work and make decisions.
Watson Wyatt’s quarterly Capital Markets Review provides a high level summary of capital market results and economic developments.
Organisations are constantly developing and redeveloping tools, techniques, systems and structures to help them manage in an increasingly complex world.
Companies in difficulties (recoverey companies) particulary need a bespoke approach to designing long-term incentives.
The gathering economic storm cloouds are already having an effect on executive share incentive arrangements.
This update follows the Private Equity Market Update we issued in September 2007, which came at a time of uncertainty, just a few weeks after the advent of the 'credit crunch'.
This update follows the Private Equity Market Update issued in October 2007, which came at a time of uncertainty, just a few weeks after the advent of the credit crunch. The paper provides a historical context for the events that have occured over the last year and considers forward-thinking perspectives.
There is more to liability hedging than just achieving a certain level of duration. This paper discusses Watson Wyatt’s perspective on how to manage basis risk in liability-driven investment strategies during tumultuous times.
In question and answer format this brief answers some commonly asked questions about infrastructure investments.
This brief provides an overview of the most important features of infrastructure investing to help institutions determine if this strategy is suitable for them.
Watson Wyatt’s quarterly Capital Markets Review provides a high level summary of capital market results and economic developments.
Despite the current economic climate, the underlying revenue performance in many banks’ business lines remains strong, and the war for talent in many market areas continues unabated. How does management address the challenge of keeping sales incentives aligned with bank strategy and competitive practices?
Employer-provided onsite health care facilities are growing in popularity. While these facilities serve a useful purpose, many employers and vendors are unaware of the employee benefit implications of providing such services. This paper outlines some of the key legal issues for onsite health centers related to the federal laws. None of these issues should be viewed as a barrier to providing onsite health services, but they should be recognized and addressed.
By examining how Exchange-Traded Funds work and who the players are in this field, we uncover the potential advantages and disadvantages of these types of funds.
The use of postcodes in mortality investigations has become increasingly common in the UK pensions sector. The mortality-related characteristics of postcodes seem to make this a potentially useful tool; however, much popular comment on this use of postcodes seems driven by commercial interests and may be less than complete in explaining the pitfalls of this analysis. This publication considers the pros and cons of ‘mortality postcoding’.
While most institutional investors are aware that most of the costs of running a pension fund are associated with external investment management fees and transaction-related expenses, many of them are seeking a better understanding of why these costs have been on the rise.
This paper discusses five practices that are essential for achieving excellence in the governance of investment and spending policies for endowments and foundations (E&Fs).
This brief provides an overview of the key types of private-equity investments to help institutions determine which strategy is most suitable for them.
In question and answer format this brief answers some commonly asked questions about private equity investments.
Until recent times, the pension scheme was often operated as an autonomous body that rarely gave cause for corporate concern.
Watson Wyatt’s quarterly Capital Markets Review provides a high level summary of capital market results and economic developments.
The factors affecting the retirement behavior of U.S. workers deserve renewed research attention and deeper understanding given recent developments such as the shift to defined contribution plans and corresponding decline in defined benefit pension plans, ongoing and proposed Social Security reforms, the recent volatility in the stock and housing markets, and exploding health care costs for retirees and workers. This paper investigates the impact of factors such as health insurance coverage, retirement plan types and public policies on the retirement timing of older workers.
In this paper we study the effect of pension provision on employee turnover in the UK. In Great Britain, there are three forms of pension coverage: the public social security system, occupational pension plans and personal pensions. We focus on the effect of occupational pension plans on job mobility by studying the different patterns formed by workers in Defined Contributions vs. workers in Defined Benefit pension schemes. Using two distinct empirical approaches we find that workers in DB pension schemes are less likely to move jobs than those in DC schemes.
The purpose of this report is to shed light on some of the problems that a multinational company might face while recruiting to set up and expand operations in these locations, or when developing a long-term development plan in the offshored country.
As more companies employ increasing numbers of expatriates in their workforce, there is a need to understand what it takes to engage them to improve a company’s performance.
Nobody is better at looking out for his own interests than that person himself. However, there are circumstances in which a trained professional truly is the best resource. This paper considers this issue as it relates to pension fund management
In this paper, we consider the key attributes of global best practice in governance, summarizing the findings from a recent academic paper written by Gordon L. Clark of Oxford University and Roger Urwin of Watson Wyatt.
This article examines what is different about managed accounts from an investment perspective and the circumstances in which they might be suitable as the default investment option for DC plans.
Until recently, contingent funding has had a low profile in the UK pensions arena.
Many pensions’ markets are experiencing a transition from Defined Benefit (DB) to Defined Contribution (DC) schemes, with most of the former being closed, frozen or wound up. Against this backdrop this paper aims to calculate the DB market’s future growth, but approaching the problem from the liabilities’ side. We develop a general model whereby we can project DB liabilities based on the expected future trends in longevity, membership dynamics and salary growth. We then can deduce the expected future evolution of DB liabilities, which if tied to assets, may be seen as an approach to predict the pension asset management market in the future.
Developed countries in general and the UK in particular have experienced a trend towards early retirement over the last couple of decades. As the retirement decision is commonly influenced not only by individual preferences but also by institutional arrangements, changes in pension coverage and design may lead to changes in the nature and time of retirement.
This technical paper, written by associates in the Watson Wyatt Research and Innovation Center, explains the methodology of the 2007/2008 Communication ROI Study.
This paper details Watson Wyatt Investment Consulting’s key investment beliefs. These beliefs support how we work with our clients.
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