Aegon Retirement Readiness Index

Aegon Retirement Readiness Index (ARRI) which assesses and quantifies levels of retirement awareness and savings behavior across 15 different countries using a score on a scale of 0-10, with 10 being the highest.


The Aegon Retirement Readiness Index (ARRI) is built on six key questions from the Aegon Retirement Readiness Survey. Of the six survey questions used, three are broadly attitudinal and three behavioral. They measure:

1. Personal responsibility for income in retirement
2. Level of awareness of need to plan for retirement
3. Financial capability / understanding of financial matters regarding plans for retirement
4. Retirement planning – level of development of plans
5. Financial preparedness for retirement
6. Income replacement – level of projected income replacement

As well as these questions, a dependent variable question is asked which is concerned with approaches to saving, for which five broad saver types have been identified: habitual, occasional, past, aspiring, and non-savers.

What does the ARRI indicate?

The ARRI ranks retirement readiness on a scale from 1 to 10. A high index score is considered to be between 8 and 10, a medium score between 6 and 7.9 out of 10, and, a low score being less than 6. (For additional information about the ARRI and its methodology, please see appendix 1 in the report).

ARRI Overview

Detailed results

Overall, the retirement readiness among workers globally has increased since the first survey in 2012.

Around the world, there has been a slight increase in awareness of the need to prepare financially for retirement and workers' readiness has improved accordingly. In the original nine countries included in the survey, the United States has the highest score, reflecting that people are more likely to feel personally responsible for their retirement planning. Japan has the lowest score.

In terms of net changes in ARRI scores, globally, the index has increased slightly between 2012 and 2016. The United States experienced the biggest increase in ARRI, while Spain remained flat. Nevertheless, across the survey's original nine countries, the ARRI scores remain in the low category.

Behavioural change

Looking at the individual indicators underpinning ARRI, it appears that improvements in the behavioral questions are driving the increases. Specifically, more people believe their personal retirement plans are better developed and they are putting aside more money than they were five years ago. However, the survey also found that fewer workers actually feel responsible for making sure that they will have sufficient income in retirement, thereby raising concerns about the long-term impact this sentiment might have on actual behavior.

Since the survey's inception in 2012, its scope has expanded from nine to 15 countries. In looking at ARRI scores among 15 countries, the upward momentum retreated slightly between 2015 and 2016, a result of mixed performances among the countries. Scores among five countries improved since 2015, three remained the same, and seven declined.

Countries showing decline

Among countries experiencing declines since 2015, the downturns reflect short-term financial shocks, notably the increased volatility in equity markets. China, which has been particularly volatile since last summer, experienced a 0.5 drop in its ARRI score, which is one of the biggest year-on-year drops in the five-year history of the ARRI.

Countries including the United States and the United Kingdom continued to improve in 2016. This is likely not a coincidence given that the widespread access to personal pension and retirement products affords people in these countries greater control over their retirement savings.

In the United States, the stock market has performed strongly, having doubled since 2009. For Americans with 401(k) plans this has likely translated into a retirement "feel-good" factor as rising stock markets typically boost the value of people's retirement savings and pension funds.

Results remain chronically low

Despite gains since 2012, with fluctuations from year to year, the 2016 survey findings indicate that ARRI scores are chronically low, thereby indicating that many workers are falling far short of what is required to be retirement ready. In 2016, more than half (53 percent) of workers globally achieved a low ARRI score (below six out of 10).

Much work needs to be done to improve retirement readiness around the world. No one group can shoulder the burden alone. Identifying and implementing solutions requires a coordinated effort among governments, pensions industry, employers, and individuals.

The overall trend is one of improving retirement readiness among today's generation of working age people. The global ARRI score has edged up slightly from 5.76 (out of 10) in 2014 to 5.86 in 2015. This is the highest score since the survey began in 2012.

Emerging markets continue to forge ahead

The sense of retirement readiness is greatest in emerging markets where real incomes have been growing fastest in recent decades. People in these countries also benefit from high interest rate environments, boosting the value of their savings and creating a sense of readiness.

This is common to all BRIC countries surveyed including India, Brazil and China – which collectively topped the ARRI ranking, although Brazil has seen its ARRI score drop amid combined low economic growth and high inflation.

Workplace retirement plans contribute to a greater sense of retirement readiness...

Among the industrialized countries, the sense of retirement readiness is greatest where workplace retirement plan arrangements are well established. This includes Australia, Canada, Germany, the Netherlands, the U.S. and the U.K. Japan is an outlier where people are less likely to feel retirement ready, perhaps reflecting the country's zero interest rate environment and retirement reforms over recent years.

Meanwhile, concerns about social security reforms loom large...

In countries where government retirement benefits are expected to make up a large part of retirement incomes, people generally feel less prepared, reflecting concerns about those systems' sustainability and future reforms that may lead to a reduction in the level of entitlements. Today's working age population is already calculating that future social security pay-outs will be less generous.

Those saving on a habitual basis feel more adequately prepared for their retirement

Over one-third (36%) of habitual savers achieved a high index score of 8 to 10. This compares with just 3% of those who hold aspirations to save. So just putting something aside for their retirement on a monthly basis will make a difference to a person's confidence in his/her retirement readiness.

Adopting this simple savings behavior is also a realistic aspiration for most individuals. The profile of the habitual saver reveals that this group is not ultra wealthy. In fact, they earn on average around $41,000 annually (equaling $29,000 in emerging markets), which is not much higher than the typical annual salary in most countries surveyed.

Women continue to lag behind men in their retirement confidence

Lower earnings, more time out of the workforce (caring for children or other family members), and working part-time remain the key factors affecting women's savings power and retirement readiness. Fifty-seven percent of women achieved a low Index score (less than 6), compared with just 47% of men, who are more likely to be found in the medium and high scoring groups.

Younger people also struggle to build their retirement readiness

This might be expected to some degree – building a retirement plan takes time, so we would expect those nearing retirement to feel more prepared for it. Younger people also have to contend with other priorities, such repaying student loans or saving to buy a house. What is most concerning is that we don't see any change in retirement readiness among those younger age groups.

It is not until we look at those in their mid-40s that readiness improves. The number of people continually scoring low on the ARRI remains persistently high (between 56% and 59%) among those aged between 18 and 44.


updated May 26, 2016

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