Improving retirement outcomes through defined contribution in Asia

Asia has some of the longest life expectancies in the world, and relatively underdeveloped social security systems. For employers, this means that providing for their employees’ retirement has become more important than ever — and a key differentiator in the suite of benefits offered to employees.

The inaugural Asia Defined Contribution Survey, which focuses on five markets in Asia, finds that approximately 1 in 5 employers in the region plan to enhance their DC plans, or set one up or transition to one if they don’t currently provide one.

What do employers want to achieve with their DC plans?

Employers in the region are taking a broad view of their DC plan strategy, with objectives focused on retirement outcomes, financial wellbeing and the employee experience; however, there is some variation between markets (Figure 1).

These objectives are interconnected: helping employees make better choices both through the focus on enhancing financial wellbeing and the employee experience is very well aligned with the desire to improve retirement outcomes and help employees save more.

Do DC plans deliver?

More than half of employers (56%) believe their DC plan is effective at providing adequate retirement incomes for employees. In the current war for talent, retirement plans are seen as a fundamental differentiator; however, less than half of employers think that their DC plan is currently acting as an effective attraction and retention tool (Figure 2).

Having a governance group in place can provide an edge

Our survey found that less than half of employers in the region have a governance group or committee providing insight around their DC plan. This finding varied by market, with 80% of employers with DC plans in the Philippines saying that they had a governance group in place, and only 24% in India saying the same (the lowest prevalence).

Employers with a governance group were almost twice as likely to say they were more effective in exercising oversight over investment managers, and 1.6 times more likely to say that they are highly effective in exercising oversight of administrators and vendors (Figure 3).

Investment strategy

Investment strategy and design is a complex area, rendered more so by recent shifts in the global investment markets (rise in interest rates, increases in market volatility and rise in ESG investing, among others). Our survey found that only half of employers have reviewed the appropriateness of the investment strategy in the past two years, and that only 2 in 5 have performed a risk assessment of the membership (Figure 4).

For more detailed findings from our survey, and the implications for employers in the region, please download our report.