7 Industries That Are Cutting Retirement Benefits

Only 1 major industry has increased retirement contributions over the past decade.

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Most employers are now spending less on retirement benefits than they did a decade ago. The value of total retirement benefits provided to new, salaried employees declined by 19 percent from 1998 to 2008, according to a new Towers Watson analysis of an average of 642 companies in eight industries. Retirement benefit payouts decreased from 7.88 percent of pay in 1998 to 6.36 percent in 2008 among the over 9 million employees studied.

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Retirement benefits included in the calculation are traditional pensions, 401(k)s and similar types of retirement accounts, and retiree medical and life insurance plans. The decline in total retirement benefits is mostly due to a 53 percent drop in the value of traditional pensions, from 4.19 percent of pay in 1998 to 1.99 percent in 2008. Many 401(k) plans were enhanced over the same time period, but the 38 percent increase in 401(k) contributions did not make up for the traditional pension cuts. 401(k) benefits increased from 2.89 percent of pay in 1998 to 3.99 percent in 2008.

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The greatest cuts in retirement benefits occurred in the retail and wholesale industry. Other industries that experienced significant decreases in benefits include manufacturing, energy, natural resources, gas and electric, pharmaceuticals, and high tech. Among the eight industries in the study, only service industry workers saw their retirement benefits increase by a modest 3 percent. Here’s a look at how much employers paid for retirement benefits in 2008 and how much that amount has changed since 1998.

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Percentage of Pay Devoted to Retirement Benefits in 2008*

(Percent change from 1998 in brackets.)

  • Retail and wholesale, 3.82 percent (down 33 percent)
  • Manufacturing, 6.35 percent (down 29 percent)
  • Energy, natural resources, and gas and electric, 9.23 percent (down 24 percent)
  • Pharmaceuticals, 9.27 percent (down 13 percent)
  • High tech, 5.24 percent (down 10 percent)
  • Financial services, 8.28 percent (down 9 percent)
  • Health care, 6.10 percent (down 4 percent)
  • Services, 4.3 percent (up 3 percent)
  • *Retirement benefits include traditional pensions, 401(k)s, and retiree medical and life insurance plans.

    Source: Towers Watson, 2010.