In the latter half of the 20th century, retirement was simple: you worked for one company for your entire career, and when the time came, they provided a plan that carried you through your golden years. But times have changed.

Now, we face a complex mix of fragmented savings, rising healthcare costs, and longer life expectancies. Job-hopping, freelancing, and the gig economy are the new norms. While these offer freedom, they also add another layer to retirement planning; we can no longer rely on a single pension. Our financial futures need to comprise a mix of different savings plans that require active engagement, personalisation, and careful management.

In a conversation recorded for episode 6 of the latest season of Old Mutual Corporate’s Big Business Insights podcast, Blessing Utete and his guests explored how companies might adjust their thinking on employee retirement, plus how it might evolve for generations to come. Utete is the Managing Executive at Old Mutual Corporate Consultants. He was joined by Doris Viljoen, Director of the Institute for Futures Research at Stellenbosch Business School, and Graeme Codrington, founder of Futures Club.

As it currently stands, most products are still tied to full-time employment and a monthly payslip. But does this work for the future that will face younger generations? Codrington thinks not. “The younger a person is today, the less they are thinking, ‘I’m going to retire,’ certainly not at 65 years old. I think there’s a demand for flexibility and a variety of different products and instruments that can deliver that,” he said.

Check your assumptions

Uncertainty and complexity are increasing, said Viljoen. The models we use might not be relevant for long. “Many models cannot really account for the real uncertainties and complexities [that we face]. We must look at those deep assumptions that we’re making. Asking those questions about what the graph is saying, but then more importantly, what the graph is not saying.”

For the sake of averages, the industry tends to look at everybody with one sort of lens, but people’s circumstances are very different. It’s understandable why companies would want to consolidate. “But I don’t think a younger generation really cares about your internal systems and controls and benefits,” said Codrington. “They would much prefer a portable retirement system that can move from job to job. ‘It’s my retirement, after all. And it’s my policy, and it’s my plan, and it’s my money, so either make it portable or just give me the money and leave me alone, and I’ll sort it out.’ In the future, it has to be something that’s linked to the person, not the employment.”

So we know we need more flexible alternatives. What do those look like? “If we speak to large employers, the churn rate at the moment runs between four and six years,” shared Viljoen. “We’re going to have multiple phases throughout our lives of different levels of economic activity. Our saving for every phase should adapt. That kind of thinking would help us start crafting, and seeing more mature spending decisions once we reach those next phases. It will help with the mental prep that is required for it.”

And how would an employer prepare for this model that potentially can’t actually be modelled? “That’s the million-dollar question,” joked Codrington. “How do you adjust an industry which is designed to be conservative? The whole point is investing in long-term assets with long-term returns. But now you’re asking it to be flexible, nimble, adjustable. In reality, it’s going to have to happen slowly over time,” he predicted. Existing structures might not shift massively, but new, more flexible products will need to emerge.

You still need to participate

The discussion clarified that this is not to say that the existing retirement annuities, pension funds, or provident funds are not good enough. They are the best they could be. However, we are at a moment in history that requires structural change looking forward.

What we should do exactly is more difficult to say. “But I think we’ve got to start with the realisation [that] it’s not going to fix itself with just working harder, saving more.” For better or worse, our financial systems can’t change overnight. And they’re still ours. “You can’t just say, ‘Oh, well, the system’s broken, therefore I opt out of the system’,” said Codrington. “Unfortunately, whether you like it or not, you’re in the system.”

Viljoen agreed that while we need to make a serious and critical assessment of why things are not working and push them to change, people still have to think long term, save, and prepare as best they can. “Individuals must make plans and have a say.”

Retirement for Gen Alpha

Will retirement, at the end of a linear journey, be in the future for Gen Alpha? The consensus is no, not if they’re going to have careers that are more like cycles, as opposed to something with a beginning and an end.

“We know the gig economy concept. Why don’t we do that now?” asked Codrington. “The dumbest decision you’d ever make as an investment [is to put] all your eggs in one basket, but that’s what almost everybody does with their employment. Why couldn’t we be employed three days a week with one employer and two days a week with somebody else in a different industry? I think the gig economy for grown-ups, if I can call it that, might be part of the future as well, but I don’t even think the concept of retirement will be in the heads of today’s young people. They’ll have a very different picture of career and lifespan in the second half of the century.”

This does, however, require them to be more engaged than their predecessors, cautioned Viljoen. “Gig workers will have to plan and provide for themselves because they are mostly excluded from any retirement plans. But this emerging field provides a big opportunity for the providers of retirement planning options.”

While we can’t predict how the world might change, we can help build a retirement industry that meets the demands of the people it serves with the solutions to match. Listen to the podcast episode for the full, fascinating conversation on this challenging issue.