Retirement Survey Richard Jackson President Global Aging Institute - PowerPoint PPT Presentation

From Challenge to Opportunity Wave 2 of the East Asia Retirement Survey Richard Jackson President Global Aging Institute PPI Winter Roundtable Los Angeles February 26, 2016 www. GlobalAgingInstitute.org

Survey Framework The first wave of the East Asia Retirement Survey was conducted in  2011 in China, Hong Kong SAR, Malaysia, Singapore, South Korea, and Taiwan. The second wave was conducted in 2014 in the six first- wave countries plus Indonesia, the Philippines, Thailand, and Vietnam. The survey is nationally representative, except that the samples for China,  Indonesia, the Philippines, Thailand, and Vietnam are limited to urban areas. The survey universe consists of “main earners” aged 20 and over,  including both current main earners and retired main earners. Respondents were asked about their general attitudes toward retirement, as  well as about their own retirement experience and expectations. Current retirees were asked about their current retirement experience,  while current workers were asked about their retirement expectations. 2

Although the ten countries surveyed differ in important respects, they also have important things in common. There are enormous Share of the Population Aged 60 & Over  differences in per capita income, institutional 45% 41% 40% capacity, degree of market 38% 40% 2015 2040 orientation, and extent of 33% 35% 33% population aging across the 29% 30% ten countries surveyed. 23% 25% 22% 19% 19% 20% 17% 17% 17% Yet all of the countries have 16%  15% 15% in common large informal 10% 10% 9% 9% sectors and underdeveloped 10% 7% welfare states. In all of the 5% countries, moreover, the 0% extended family continues to play a far more important role in retirement security than it does in the West. UN Population Division 3

What Kind of Retirement System Do East Asians Want? 4

By overwhelming majorities, East Asians reject the traditional model of family-centered retirement security. "Who, ideally, should be mostly responsible for providing income to retired people?” and "Who, ideally, should be mostly responsible for providing personal care to retired people?” Share of Respondents Saying "Grown Children or Other Family Members" 70% 63% 60% 60% Income Personal Care 48% 50% 40% 34% 32% 30% 29% 30% 26% 21% 20% 20% 13% 11% 11% 10% 10% 10% 8% 8% 10% 6% 6% 0% 5

Looking to the future, today’s workers expect to be less dependent on the family than today’s retirees are. Share of Today's Retirees Who Are and Share of Today's Workers Who Expect to Be Financially Dependent on Their Grown Children 45% 40% 40% Today's Retirees Today's Workers 37% 35% 32% 29% 30% 27% 25% 25% 21% 20% 20% 17% 16% 16% 14% 14% 15% 12% 12% 10% 9% 10% 6% 6% 6% 5% 0% 6

Along with declining family size, the shift is being driven by the diffusion of more individualistic “western” values. Share of Respondents Agreeing that “Both parents and children are generally happier when they are more independent and self- sufficient.” Vietnam 22% Indonesia 27% Thailand 27% Malaysia 27% Philippines 29% Singapore 31% Hong Kong 41% China 45% South Korea 59% Taiwan 68% 0% 10% 20% 30% 40% 50% 60% 70% 80% 7

Views differ greatly across East Asia about who should replace the family as guarantor of retirement security. " Who, ideally, should be mostly responsible for providing income to retired people?” Share of Respondents Saying “Retirees Themselves, through Their Own Savings” versus Share Saying “Government” 70% 66% 66% 63% Retirees Themselves Government 62% 61% 60% 48% 50% 45% 44% 43% 41% 40% 40% 36% 34% 30% 30% 23% 22% 18% 18% 20% 10% 9% 10% 0% 8

The Outlook for Retirement Security 9

For today’s retirees, retirement is frequently a time of economic insecurity and social marginalization. Share of Today's Retirees Who Have "More Income" Now Than When Working versus Share Who Have "a Lot Less Income" 80% 69% 70% More Income A Lot Less Income 61% 60% 47% 50% 45% 43% 40% 33% 29% 30% 26% 18% 20% 15% 14% 14% 8% 7% 10% 6% 5% 4% 4% 2% 2% 0% 10

With rates of state pension receipt due to rise in most countries, the outlook for today’s workers is improving. Share of Today's Retirees Receiving and Share of Today's Workers Expecting to Receive Income from the State Pension System 100% 95% 91% 89% 89% Today's Retirees Today's Workers 86% 90% 83% 79% 80% 68% 68% 68% 70% 65% 61% 60% 59% 60% 55% 55% 54% 49% 50% 45% 44% 40% 30% 20% 10% 0% 11

Rates of asset income receipt are also due to rise, though vast differences in market-orientation will persist across East Asia. Share of Today's Retirees Receiving Income and Share of Today's Workers Expecting to Receive Income from Financial Assets* 90% 77% 80% Today's Retirees Today's Workers 74% 73% 68% 70% 63% 60% 60% 60% 51% 50% 48% 50% 42% 42% 41% 40% 30% 19% 18% 18% 20% 13% 11% 8% 10% 3% 0% * Includes insurance and annuity policies and stocks, bonds, and mutual funds, but excludes bank deposits. 12

Today’s workers expect to work longer than today’s retirees did, which should also improve their retirement prospects. Share of Today's Retirees Who Retired at Age 60 or Later and Share of Today's Workers Expecting to Retire at Age 60 or Later 80% 76% 75% 71% Today's Retirees Today's Workers* 71% 70% 65% 60% 60% 60% 56% 51% 50% 49% 50% 39% 40% 34% 33% 32% 29% 28% 30% 20% 20% 14% 8% 10% 0% * Includes workers who never intend to retire. 13

Despite the positive trends, today’s workers remain extremely anxious about their retirement security. Share of Today's Workers Who Worry about Being "Poor and in Need of Money" during Retirement China 50% Taiwan 60% Hong Kong 64% Singapore 66% Malaysia 68% Thailand 79% South Korea 81% Indonesia 83% Philippines 90% Vietnam 95% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 14

Three Reasons for Workers’ Retirement Insecurity Average Net Financial Asset-to-Income Ratio of Although pension receipt  Survey Respondents at Age 50* rates are rising in most countries, replacement Indonesia rates are generally low. .2 Philippines .2 Thailand In countries with pay-as-you- .3  go state pension systems, Vietnam 1.1 workers are concerned about China 1.4 the security of government Malaysia 1.9 benefit promises. Singapore 2.7 Taiwan 2.7 Most workers are not  saving enough for Hong Kong 2.8 retirement on their own to South Korea 3.5 make up for the likely gap .0 1.0 2.0 3.0 4.0 in pension income. * Includes all classes of household financial assets; ratios are averages for respondents aged 45-54. 15

In addition to their own retirement security, respondents in faster-aging countries worry about the growing burden of supporting the elderly on tomorrow’s workers and taxpayers . Share of Respondents Agreeing and Disagreeing That "Supporting the Growing Number of Elderly Will Be a Large Burden for Tomorrow’s Workers and Taxpayers" 80% 68% Agree Disagree 70% 60% 60% 53% 51% 46% 50% 43% 43% 41% 40% 39% 40% 32% 31% 30% 29% 27% 27% 30% 20% 20% 19% 20% 12% 10% 0% Note: The question used a five-point scale, with 1 being strongly disagree and 5 being strongly agree. "Agree" = 4 + 5 and "Disagree" = 1 + 2. 16

Respondents in faster-aging countries also worry about the growing burden on tomorrow’s families. Share of Respondents Agreeing and Disagreeing That "Supporting the Growing Number of Elderly Will Be a Large Burden for Tomorrow’s Families" 80% 71% 68% 70% 65% Agree Disagree 60% 56% 51% 48% 50% 46% 45% 43% 40% 40% 32% 32% 30% 26% 26% 24% 24% 19% 20% 15% 15% 10% 10% 0% Note: The question used a five-point scale, with 1 being strongly disagree and 5 being strongly agree. "Agree" = 4 + 5 and "Disagree" = 1 + 2. 17

Strategic Implications 18

Implications for Policymakers Share of Today's Workers Who Do NOT Expect Improve the adequacy of  to Receive a State Pension Benefit state pension systems China 5% Encourage or require Hong Kong 9%  workers to save more for Singapore 11% their own retirement Malaysia 11% South Korea 14% Establish more robust floors Philippines 32%  of old-age poverty Taiwan 32% protection Thailand 41% Vietnam 51% Raise retirement ages and Indonesia 55%  encourage longer work lives 0% 10% 20% 30% 40% 50% 60% 19

Implications for Policymakers Share of Respondents Saying “Require Workers to Improve the adequacy of  Contribute More to Pay for Government Pension state pension systems Programs” versus Share Saying “Require Workers to Save More for Their Own Retirement” Contribute More Encourage or require  workers to save more for Save More 100% 90% 90% 90% 89% 88% their own retirement 85% 85% 83% 82% 77% 77% 80% 72% 68% 68% 64% 64% 57% Establish more robust floors 60% 54% 52%  of old-age poverty 40% 30% protection 20% Raise retirement ages and 0%  encourage longer work lives 20