The case for a new social contract for retirement

5 minute read

On the day that Aegon publishes its seventh annual Retirement Readiness Survey at the OECD, Alex Wynaendts, CEO of Aegon, outlines the case for a new social contract for retirement and calls for a more positive view on aging.

The need for a new social contract is urgent. People are today living longer than at any other time in history. While this is a cause for celebration, it also poses profound and far-reaching challenges for society. 

In many countries, the traditional social contract for retirement – based on the three pillars of social security, workplace retirement benefits and personal savings – is crumbling, and responsibility is shifting fast from governments and employers to individuals.

Every year, Aegon's Center for Longevity and Retirement surveys thousands of people around the world so that we can better understand how people view retirement – providing a unique picture of their hopes and dreams, concerns and apprehensions. This year's report is however far more than a mere collection of insights and statistics. Taken as a whole, its conclusions represent a compelling call to action. We need a new social contract for retirement; one in which we for the first time truly embrace the economic and social realities of tomorrow.

What kind of new social contract?

Perhaps the biggest challenge of all is that we need to ensure the long-term sustainability of social security benefits. Ultimately this requires governments to make difficult financial decisions and trade-offs, such as reducing retirement benefits, raising taxes or increasing the retirement age. What we need is to ensure fairness across generations, reducing the risk of poverty for the elderly now and in the future.

In a world in which responsibility for preparing for retirement is shifting, we need to ensure that there is universal access to long-term saving products and services that encourage people to save. By doing so we will be able to serve otherwise vulnerable groups, such as those working on a freelance basis or taking time out of work to care for family and loved ones.

For many people, retiring at 65 is simply no longer a financially viable option. This means that we, as individuals and as a society, need to look at our working lives in a fundamentally different way. The traditional career trajectory of taking on additional responsibilities over time before abruptly stopping work at pension age is becoming a thing of the past. It needs to be replaced by a more flexible approach and the ability to transition into retirement, be it by reducing hours or working in a different capacity. This requires fully valuing the contributions of older workers. Sadly, ageism is still a big issue, and we must all play our part in tackling negative stereotypes head-on, adopting a far more positive view of aging.

Good health is essential for people's ability to work longer and enjoy the retirement for which they've worked so hard. Unfortunately, for a number of reasons, many people are not doing enough to protect their long-term health. From a societal perspective, it is therefore imperative that governments, NGOs, industry, employers, healthcare providers, and of course individuals, promote vitality so that everyone can live longer, healthier lives and make healthcare affordable and accessible for all.

Saying that people need to take more responsibility for their own financial future may be an economic reality, but simply telling them this is not enough. Many people lack the financial literacy required to make sound decisions about their retirement savings and investments. Much can be done to improve this, for instance ensuring that financial literacy is part of the educational curriculum so that young people learn the basics of budgeting, investing and managing their savings – skills that will serve them for the rest of their lives.

Join the debate

It is no exaggeration to say that how we prepare for older age is one of the great challenges of the 21st century. It is, however, a problem that can be solved. By working together and forging a new social contract, we can help people around the world secure the retirement they deserve. Please join the debate by following and using the hashtag #TheNewSocialContract, and let us know what you think.