Public-Sector Workers Report Retirement Readiness, but Gaps Remain

Public employees, many of whom still have defined benefit pension funds, report higher levels of retirement preparedness than their private-sector peers, because public workers have immediate access to a pension. However, Voya Financial Inc.’s recent report, “Beyond the Pension: What Really Drives Retirement Confidence for Public Employees,” found workers in the public sector lagging in knowledge, engagement and informed financial behavior.

According to the report, 89% of government workers surveyed said they are prepared for retirement, but nearly 80% said they wanted help making investment decisions.

“Pensions provide a strong foundation, but employees need help connecting pensions, savings and everyday finances,” wrote Gavin Gruenberg, Voya Financial’s government market retirement sales leader, in an emailed response to questions. “It’s also very important to understand the details behind pension benefits.”

Government employees who worked with an adviser reported being far more likely than those without one to report increased confidence in meeting their retirement goals over the past two years (57% vs. 35%).

Engagement with professional financial advice varied, according to the report; as 54% of government employees reported meeting with a financial adviser in the past year, compared with 60% of nongovernment workers.

“Advisers have a clear opportunity to help employees turn available resources into meaningful action,” Gruenberg wrote. “It’s not enough to offer tools and resources. Advisers play a key role in helping employees engage with and use them effectively.”

Pension Literacy

Although pension funds are often central to public-sector retirement planning, many surveyed public employees reported lacking a clear understanding of their benefits.

Voya’s survey found that workers who knew their pension plan tier were significantly more likely to feel confident about retirement than those who did not (51% vs. 32%). Yet 21% of respondents said they were unsure which tier they belonged to.

Experts say that lack of clarity can have real financial consequences. Employees who overestimate their pension benefits may save too little in supplemental defined contribution plans or other accounts, while those with more generous benefits may allocate too much to retirement savings at the expense of other financial priorities.

“Public sector employees have a solid foundation, but many still need help translating that into informed financial decisions,” Gruenberg wrote.

The report also emphasized the value of ongoing engagement. Public employees who connected with advisers reported being more confident, yet many were not consistently using available guidance.

Ultimately, Gruenberg emphasized the need for public sector plan participants to do more than rely on their pensions.