Wave 2 of the East Asia Retirement Survey Richard Jackson - PowerPoint PPT Presentation

From Challenge to Opportunity Wave 2 of the East Asia Retirement Survey Richard Jackson President Global Aging Institute University of Indonesia Jakarta September 2, 2015 Gap.GlobalAgingInstitute.org

Survey Framework The East Asia Retirement Survey is now in its second wave. The first  wave 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 were limited to urban areas. The survey universe consists of “main earners” aged 20 and over,  including both current main 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

The Future of Retirement in Indonesia 3

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% 4

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 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% 5

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% 6

Indonesians are divided about the role of government, employers, and individuals in providing retirement income. "Who, ideally, should be mostly responsible for providing income to retired people?" Share of Indonesian Respondents Saying... 50% 45% 45% 40% 35% 30% 25% 25% 18% 20% 15% 11% 10% 5% 0% Government Former Employers Retirees Themselves Grown Children 7

Most Indonesians are anxious about their retirement security, and with good reason. Share of Today's Retirees and Share of Today's Workers in Indonesia Who Worry about Each of the Following Things Happening during Retirement... Today's Retirees Today's Workers 100% 89% 87% 90% 85% 83% 82% 80% 79% 80% 75% 70% 60% 50% 40% 30% 20% 10% 0% Being in poor health Being a burden on their Exhausting their Being poor and in need and having no one to children savings of money care for them 8

While state pension receipt is expected to rise in most East Asian countries, in Indonesia it is expected to fall. 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% 9

Very few Indonesians can count on asset income in retirement. 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. 10

Indonesia’s early retirement ages complicate the challenge of ensuring retirement security. 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. 11

Strategic Implications 12

What Indonesians Think About Retirement Reform Share of Indonesian Respondents Saying That Government Should or Should Not ... Should Not Should 100% 10% 90% 19% 80% 38% 46% 47% 70% 68% 60% 50% 90% 40% 81% 30% 62% 53% 54% 20% 32% 10% 0% Increase taxes to Require Require workers Raise the Encourage Require workers provide a basic employers to to contribute retirement age workers to save to save more for pension benefit to offer more jobs to more to pay for more for retirement those elderly who the elderly government retirement are in financial pension programs need 13

Directions for Reform Share of Today's Workers Who Do Not Expect to Improve the adequacy of  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% 14

There is widespread demand for translating lump-sum pension payments into retirement income streams. “ If you could choose how pension benefits will be paid to you, please indicate which of the following ways you would prefer to receive the benefits.” Share of Today's Workers Saying “All in Regular Monthly Payments” versus Share Saying “All in a Single Lump Sum” 90% 78% All in Monthly Payments 80% 69% All in a Lump Sum 70% 62% 59% 60% 53% 52% 50% 45% 45% 44% 38% 40% 30% 25% 19% 19% 18% 19% 20% 14% 11% 7% 7% 7% 10% 0% 15

Directions for Reform 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% 90% 85% 83% 82% 77% 77% 80% 72% 68% 68% 70% 64% 64% 57% Establish more robust floors 60% 54% 52%  50% of old-age poverty 40% 30% protection 30% 20% 10% Raise retirement ages and 0%  encourage longer work lives 16

Although Indonesians have a low level of market-orientation, they have a high level of trust in the financial services industry. Share of Respondents Agreeing and Disagreeing That "People Can Trust Financial Services Companies to Help Them Prepare for Retirement" 70% 63% 59% 60% Agree Disagree 50% 50% 50% 45% 43% 42% 41% 38% 40% 32% 30% 30% 29% 29% 29% 30% 27% 19% 20% 16% 12% 8% 10% 0% Note: This question used a five-point scale, with 1 being strongly disagree and 5 being strongly agree. "Agree" = 4 + 5 and "Disagree" = 1 + 2. 17

Directions for Reform Share of Respondents Saying Government “Should Improve the adequacy of Increase Taxes to Provide a Basic Pension Benefit  state pension systems to Those Elderly Who Are in Financial Need” Vietnam 27% Encourage or require  Indonesia 32% workers to save more for Philippines 43% their own retirement Singapore 60% Malaysia 61% Establish more robust  Thailand 67% floors of old-age poverty Hong Kong 69% protection Taiwan 72% China 74% Raise retirement ages and  South Korea encourage longer work lives 75% 0% 10% 20% 30% 40% 50% 60% 70% 80% 18

Directions for Reform Share of Respondents Saying Government Should Improve the adequacy of  Raise the Retirement Age state pension systems Philippines 23% Encourage or require China 38%  workers to save more for Taiwan 40% their own retirement Vietnam 43% Malaysia 53% Establish more robust floors  Singapore 54% of old-age poverty Thailand 60% protection Indonesia 62% Hong Kong 68% Raise retirement ages and  South Korea 83% encourage longer work lives 0% 20% 40% 60% 80% 100% 19

GLOBAL AGING INSTITUTE Gap.GlobalAgingInstitute.org 20