US. The Dangerous Consequence Of Cutting Public Safety Pensions
Management consulting firm McKinsey reports that organizations that appear on “best places to work” lists often make the cut because their business strategy is premised on a long-term relationship with their employees. McKinsey credits companies for both the large and small signals sent to employees that an organization cares about its people.
Valued by employers as a workforce management tool to recruit and retain talent, offering defined benefit (DB) pension benefits is one way that employers send a loud signal to employees that they are committed to a long-term relationship. The structure of a pension increases the financial value of a DB pension benefit over an employee’s career. This provides a meaningful incentive for employees to stay in their jobs. Research indicates that employees value pensions as a path economic security in retirement, especially as compared to individual defined contribution (DC) accounts.
Offering pensions is particularly important in the public sector where salaries are low and employers can’t offer benefits like stock options. The recruitment and retention effects of pensions are key reasons why the public sector has maintained this type of retirement plan, especially for public safety officers.
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