Wave 2 of the East Asia Retirement Survey

Transcription

1 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

2 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 firstwave 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

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

4 What Kind of Retirement System Do East Asians Want? 4

5 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" 7 Income Personal Care 48% 63% 21% 6% 8% 26% 29% 6% 11% 32% 34% 13% 11% 8% 5

6 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% Today's Retirees Today's Workers 37% 35% 25% 15% 5% 9% 17% 16% 6% 6% 6% 14% 25% 12% 27% 21% 29% 12% 32% 14% 16% 6

7 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 Thailand Malaysia Philippines Singapore 27% 27% 27% 29% 31% Hong Kong China 41% 45% South Korea 59% Taiwan 68% 7 8 7

8 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 7 61% Retirees Themselves Government 62% 63% 66% 66% 23% 48% 36% 44% 41% 34% 43% 18% 45% 22% 18% 9% 8

9 The Outlook for Retirement Security 9

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

11 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 45% Today's Retirees 68% 49% 61% 59% Today's Workers 44% 68% 68% 55% 54% 86% 79% 89% 89% 91% 65% 55% 83% 95% 11

12 9 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* 8 7 Today's Retirees 77% Today's Workers 68% 63% 41% 42% 42% 48% 73% 74% 51% 3% 8% 18% 18% 11% 13% 19% * Includes insurance and annuity policies and stocks, bonds, and mutual funds, but excludes bank deposits. 12

13 Today s workers expect to work longer than today s retirees did, which should also improve their retirement prospects. 8 7 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 8% Today's Retirees 33% 28% Today's Workers* 56% 14% 39% 32% 65% 49% 71% 71% 29% 51% 75% 76% 34% * Includes workers who never intend to retire. 13

14 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 Taiwan Hong Kong Singapore Malaysia 64% 66% 68% Thailand South Korea Indonesia 79% 81% 83% Philippines 9 Vietnam 95%

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

16 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" % 12% Agree 53% 46% 27% 19% Disagree 43% 41% 39% 31% 29% 43% 32% 27% 51% Note: The question used a five-point scale, with 1 being strongly disagree and 5 being strongly agree. "Agree" = and "Disagree" =

17 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" % 65% 15% 46% 45% 19% Agree 26% Disagree 43% 32% 32% 56% 51% 26% 24% 24% 48% 15% 68% Note: The question used a five-point scale, with 1 being strongly disagree and 5 being strongly agree. "Agree" = and "Disagree" =

18 Strategic Implications 18

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

20 Implications for Policymakers Improve the adequacy of state pension systems Share of Respondents Saying Require Workers to Contribute More to Pay for Government Pension Programs versus Share Saying Require Workers to Save More for Their Own Retirement Encourage or require workers to save more for their own retirement Establish more robust floors of old-age poverty protection Raise retirement ages and encourage longer work lives 10 8 Contribute More Save More 77% 82% 83% 85% 85% 88% 89% % 72% 68% 68% 64% 64% 57% 52% 54% 20

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

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

23 Implications for Financial Services Educate the public about the role of the financial services industry in retirement planning Help workers turn their retirement savings aspirations into retirement realities Share of Respondents Agreeing and Disagreeing That "People Can Trust Financial Services Companies to Help Them Prepare for Retirement" 7 63% 59% Agree Disagree Design financial products and services for workers who want to assume responsibility for their own retirement 8% 12% 29% 19% 45% 43% 42% 41% 38% 32% 29% 29% 27% 16% Satisfy the demand for converting household savings and lump-sum pension payments into retirement income streams Note: This question used a five-point scale, with 1 being strongly disagree and 5 being strongly agree. "Agree" = and "Disagree" =

24 Implications for Financial Services Educate the public about the role of the financial services industry in retirement planning Help workers turn their retirement savings aspirations into retirement realities Design financial products and services for workers who want to assume responsibility for their own retirement Satisfy the demand for converting household savings and lump-sum pension payments into retirement income streams Share of Today's Workers Aged Who Have Purchased Financial Assets as a Percent of All Workers Aged Who Expect to Receive Income from Financial Assets* in Retirement China Vietnam Indonesia Malaysia South Korea Thailand Hong Kong Taiwan Singapore 31% 52% 53% 59% 63% 67% 69% 75% * Includes insurance and annuity policies and stocks, bonds, and mutual funds, but excludes bank deposits. Note:The Philippines is excluded from the chart because of insufficient data. 24

25 Implications for Financial Services Educate the public about the role of the financial services industry in retirement planning. Help workers turn their retirement savings aspirations into retirement realities Design financial products and services for workers who want to assume responsibility for their own retirement Satisfy the demand for converting household savings and lump-sum pension payments into retirement income streams 7 Have you ever received professional financial advice about how to invest your retirement savings? Share of Today's Workers Saying Yes, by Educational Attainment 5% 6% 25% 26% 23% 21% Less than Secondary Secondary Postsecondary 34% 35% 11% 26% 26% 19% 9% 39% 45% 23% 47% 18% 35% 53% 54% 39% 37% 25% 65% 54% 25

26 Implications for Financial Services Educate the public about the role of the financial services industry in retirement planning Help workers turn their retirement savings aspirations into retirement realities Design financial products and services for workers who want to assume responsibility for their own retirement Satisfy the demand for converting household savings and 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 38% 19% All in Monthly Payments All in a Lump Sum 44% 45% 45% 25% 7% 52% 53% 14% 19% 18% 59% 62% 69% 11% 19% 78% 7% 7% 26

27 GLOBAL AGING INSTITUTE 27