The days of the defined benefit (DB) retirement plan are so over.  In 1998, DB plans, a cornerstone in union heavy industries such as manufacturing and energy, comprised 4.19% of employer payroll costs. Ten years later, that amount dropped to 1.99%. In addition to the rapid shrinking of DB retirement plans, employers have made significant cuts to this benefit overall.  Between 1998 and 2008, retirement benefits  dropped 19%. These reductions, along with the louder warning bells about Social Security funding, mean that financial services providers have a new opportunity to market retirement saving programs to consumers.

According to Towers-Watson,  retirement contributions as a percentage of pay stands at the following levels by industry. (The number in parentheses represent the drop from 1998):

  • Retail/Wholesale 3.83% (-33%)
  • Manufacturing 6.35% (-29%)
  • Energy, Natural Resources 9.23% (-24%)
  • Pharmaceuticals 9.27% (-13%)
  • High Tech 5.24% (-10%)
  • Financial Services  8.28% (-9%)
  • Health Care 6.1% (-4%)
  • Services 4.3% +3%

Kevin Wagner, senior retirement consultant at Towers Watson points out that “the financial crisis and the Pension Protection Action of 2006 have been factors contributing to employers’ careful examination of their retirement plan strategies.” The new restraint on retirement contributions is additional evidence of a trend – employers are looking to improve their bottom lines and sometimes the need for profitability hits employee benefits. As more consumers take responsibility for planning and funding their own retirement plans, financial planners, banks and similar service providers may increase their marketing campaigns to communicate directly with consumers on this important topic.

[Source:  Retirement Benefits for U.S. Workers Declined. Towers Watson. 22 Jul. 2010. Web. 5 Aug. 2010]