Retirement Readiness Around the World

All developing countries face the challenge of an aging population. How they address these problems depends on political, economic and cultural factors particular to each nation.

Increasing longevity and falling birth rates mean the balance between those earning money and paying tax and those receiving state and employer-sponsored pensions is shifting. Governments, employers and individuals are being forced to change their role in retirement provision, with the clear direction of travel being towards more personal responsibility.

Each nation has its own starting point, but there is much to be learnt by sharing the diverse ideas being applied to address the challenge of global aging, and understanding public attitudes to the changes being asked of them.

Our Retirement Readiness Survey, The Changing Face of Retirement found a diverse range of strategies to the challenge of aging emerging across the nine countries - eight European plus the United States – covered in the report. Attitudes reflect economic and geographical factors, with each state's cultural and social characteristics also playing a role.

People in those countries emerging from the financial crisis in better shape - Germany, Sweden and the United States – are not surprisingly most optimistic and best prepared for retirement. Americans are most confident of all, with 43% optimistic they will enjoy a comfortable retirement.

Countries still in the grip of the financial crisis on the other hand are far more pessimistic. Spanish workers have a particularly pessimistic view of their retirement, with 36% of employees thinking they will never actually retire, but will continue in their current work pattern into old age.

Pessimism is high across countries in southern, central and eastern Europe, where state pension reforms are downgrading public expectations of retirement.

In Poland, for example, reforms have broken the link between contributions and income received and an increase in pension age from 60 for women and 65 for men to 67 for both sexes is planned. This has undermined the public's confidence in their pension system, making Poles the most pessimistic they will enjoy a comfortable retirement, a fear for 66% of those surveyed. Pessimism is also high in Hungary, which saw reforms implemented in 2011. An overwhelming 84% of Hungarians believe future generations will be worse off in retirement, more than any other nation surveyed.

Hungary came bottom of Aegon's Retirement Readiness Index, which ranks countries' readiness on the basis of responses to six questions about attitudes to saving and actions taken to date. Poland came second bottom, followed by Spain and then France. Germany, the United States and the Netherlands came out as most prepared.

Germany has a massive demographic challenge, with its working age population to fall from 50 million to around 26.5 million over the next 50 years. Pressure on Germany's already generous state and employer pensions is fostering an understanding that things will change, with an overwhelming majority of 81% expecting state benefits to become less generous in the future and 83% saying they are more likely to plan for their retirement.

American workers expressed an unrivalled enthusiasm for making money in retirement, with 73% of today's workers expecting to carry on working in some form. Interestingly, a considerable minority of 12% want to start their own business in retirement – perhaps heralding the emergence of a silver entrepreneur generation.

Workers in the United States are the most confident of all that they will be comfortable in retirement, (46%) while the French are least confident (16%). Given the fact that the American system offers considerably less state and employer support for retirement than the French system, this positive attitude suggests that self-provision can be made to work.

The concept of a move away from a 'cliff-edge' of retirement to a phased reduction in work is gaining ground across all countries. Among those already retired, stopping work immediately was most common in France (64%) and the United States (63%). But when it comes to today's workers' plans for their future, attitudes are changing, although the pace of change varies widely. While American retirees are second most likely to simply stop working, workers in the country today are least likely to follow that path, with just 18% expecting to never work again after they retire.

The desire for an end to work at retirement is most entrenched in France, where 45% still want a retirement cliff-edge, compared to 30% across all the countries surveyed.

Working longer appears to empower citizens into feeling confident about their long-term future. Sweden already has a strong tradition of working older people, with more than 70% of 55 to 64 year olds in work, compared to France where the figure is under 40%. Yet Swedes are also less likely to have a negative view of their likely standard of living in retirement (30%) than any other nation, in the survey. Among French workers the figure is 63%.

All governments in survey countries are attempting to reform their pensions systems, with cultural and political factors shaping public resistance to change in different ways.

The Dutch are the most likely to believe state pensions can be successfully reformed, with 31% believing it will remain affordable in the future, compared to 12% globally.

The options open to governments when reforming pensions are reducing benefits, increasing taxes and raising pension age.

Along with workers in Hungary, Britons are most likely to favor a balanced approach – with reduction of benefits and tax increases needed to keep the state system solvent.

But only 28% of workers in the United Kingdom feel optimistic about being able to choose when they will retire, perhaps reflecting the recent increase in state pension age, which rises to 67 by 2028.

Attitudes against increasing state retirement age are hardest in northern Europe, with 57% of Swedes and 51% of Germans against the policy, compared to an average across the survey of 47%.

How rises are calculated is also a matter of contention. Only around a fifth of workers in the Netherlands agree state pension age should be linked to increases in life expectancy, even though the country has adopted the policy for future increases.

All countries are adapting their systems in the way that best suits their circumstances. By learning from the mistakes and successes from around the world, together we can understand better how to meet the challenges of global aging.