Spain Country Report A Retirement Wake-Up Call The Aegon Retirement Readiness Survey 2016
Contents Introduction 3 Key Findings 4 The 2016 Survey: Part 1 The state of retirement readiness: 2012 to 2016 5 Part 2 Retirement readiness is a shared responsibility and it requires a shared solution 8 Part 3 Habitual saving is critical for success 9 Part 4 Making it easy and more convenient to save 11 Part 5 The imperative for retirement literacy and planning 14 Part 6 It s personal: Making the case for the new flexible retirement 16 Part 7 The promise of active living and healthy aging 17 Recommendations 18 2 The Aegon Retirement Readiness Survey 2016
Introduction In its fifth year, the Aegon Retirement Readiness Survey explores how increasing life expectancy is having an impact on the ways in which individuals plan for retirement. Countries around the world are facing unprecedented change, creating both challenges and opportunities. The concept of retirement is evolving; life expectancy continues to increase; pressures on governments and pension systems are intensifying; greater responsibility is shifting to the individual. People are having difficulty keeping up with this rapid pace of change. Too few are adequately saving and planning for retirement. Most need greater access to financial advice and planning tools in order to navigate the future and improve their retirement outlook. Moreover, people s expectations of how they will transition to retirement may be unrealistic unless employment practices change. The conclusion is that Spaniards need a retirement wake-up call. Solving the retirement challenge must be recognized as a shared responsibility. It requires engaging all stakeholders governments, pensions industry, employers, and individuals to actively take responsibility, and create a dialogue for an inclusive retirement, and implement solutions so that everyone has the opportunity to achieve long-term financial security. Very little progress has been made since 2012 in retirement saving behavior among Spanish workers, and they are still lagging behind other countries when it comes to retirement preparedness. More needs to be done if people are going to enjoy a comfortable, secure life in retirement. This report evaluates the current state of retirement readiness and delineates key areas warranting focus and attention, including the need for: sharing the responsibility for retirement preparation, inspiring a world of habitual savers, making retirement plans more inclusive by design, facilitating the new flexible retirement, and, promoting active living and healthy aging in retirement. The Aegon Retirement Readiness Survey 2016 3
Key Findings Spain ranks second from last in the 2016 Aegon Retirement Readiness Index (ARRI). With a score of 5.0 out of 10, Spain has a low level of retirement readiness, well below the global average of 5.8. Only Japan has a lower level of retirement readiness and Spain has made no headway over the past 5 years. Spanish attitudes contributing to retirement readiness have largely remained stable. Over half of Spanish workers (57 percent) feel personally responsible for ensuring that they will have sufficient income in retirement and almost half (46 percent) are aware of the need to plan financially for retirement. However although level of awareness has improved from 44 percent in 2012, level of personal responsibility has actually fallen from 64 percent. Spanish behaviors driving retirement readiness remain stable. Almost a third (32 percent) of Spanish workers feel that their personal retirement planning is well developed which has improved slightly from 29 percent in 2012. A quarter of workers (25 percent) say they are saving enough for retirement which has decreased slightly from 26 percent in 2012. Thirty-six percent of workers think that they will achieve 75 percent or more of their needed income in retirement compared to 37 percent in 2012. Spaniards are in strong agreement that the government should be responsible for funding people s retirement. Eighty-one percent agree that the government should provide for people through social security. Agreement that individuals should be responsible is much weaker, only half (51 percent) agree that individuals should save for themselves through private pensions or other investments. Seven-in-ten (70 percent) agree that employers should provide through retirement plan benefits. Spanish workers and retirees anticipate that their government will fund the majority of their income in retirement. Spaniards will largely depend on government funding, estimating that it will provide 64 percent of their income in retirement (well over the global average 46 percent). They expect far less of their employers compared to the global average (12 percent and 24 percent respectively) and expect less to come from their own savings and investments compared to the global average (24 percent and 30 percent respectively). Just over a quarter (27 percent) of Spanish workers save habitually for retirement compared to 38 percent globally. Despite being low, the proportion of habitual savers in Spain is at least robust having increased very slightly from 26 percent in 2012. Auto-enrollment is appealing to 59 percent of Spanish workers at 6 percent deferral. A majority of Spanish workers find auto-enrollment appealing at 6 percent deferral (59 percent) which is less than the global average (65 percent). It holds almost the same appeal at an 8 percent deferral rate at 55 percent, again below the global appeal (61 percent). Spanish employers are not keeping up with offering of digital retirement tools to their employees. Less than 10 percent of Spanish workers report having access to digital tools such as: online retirement modelling tools, digital access to view and manage retirement savings, webcasts and seminars about saving for retirement to help them prepare for retirement or to shape and manage their retirement accounts. One-in-five (20 percent) Spanish workers have a written retirement strategy and this has been increasing since 2013. Half (50 percent) of Spanish workers currently have a retirement strategy, up from 41 percent in 2013. However this is still below the global average of 58 percent. Twenty percent have a written plan, which is well above the global average of 13 percent. Almost a quarter (23 percent) of Spanish workers have backup plans if they become unable to work and have to leave work earlier than planned. Spanish workers with backup plans will use their personal savings (54 percent), will rely on their spouse or partner working (26 percent), or will rely on government unemployment insurance (22 percent) if they become unable to work. Just under half (46 percent) of Spaniards are paying into life insurance coverage. Of those who carry it, the most important considerations are the level of coverage (40 percent), and equally, cost or premiums and clear and easy to understand products at 31 percent. Spaniards who don t have life insurance say either they can t afford it (32 percent) or that they simply never thought about it (28 percent). 4 The Aegon Retirement Readiness Survey 2016
Spaniards started making contributions to the statutory pension system at an average age of 22. On average, Spaniards were three years into their working career when they started making contributions to the statutory pension system. Almost two-in-five (39 percent) of Spanish workers say that they will continue working to some extent into retirement which is some way below the global average (57 percent). Spaniards who say that they will continue working into their retirement years largely say they will do so for positive reasons, for example, to keep active or to keep their brain alert (47 percent), or because they enjoy their work or career (28 percent). Others however are anxious about funding their retirement. Thirty-four percent say they will continue working due to general anxieties about their retirement income and whether their savings will last, and 37 percent are concerned that Social Security benefits will be less than expected. Part 1: The state of retirement readiness: 2012 to 2016 The Aegon Retirement Readiness Survey is now in its fifth year. A cornerstone of the research is the Aegon Retirement Readiness Index (ARRI) which was created in 2012 to assess the relative levels of retirement preparedness across workers in all countries included in our survey. Individuals are grouped according to whether they achieve a high index score (eight or above out of 10), a medium score (between six and 7.99) or a low score (below six). With a score of 5.0 this year, Spain ranks second lowest in retirement preparedness out of the 15 countries in the survey, reflecting poorly on the way in which the Spanish approach planning for their retirement. Chart 1 Spain ranks second lowest in the 2016 Aegon Retirement Readiness Index 5.8 4.7 5.0 5.0 5.3 5.3 5.4 5.6 5.8 5.9 6.0 6.1 6.1 6.7 6.7 7.3 Total Japan Spain Hungary Poland France Turkey The Netherlands Australia Canada China United Kingdom Germany United States Brazil India The Aegon Retirement Readiness Survey 2016 5
Chart 2 5-Year Trend: Spain s Aegon Retirement Readiness Index 5.0 4.4 5.0 5.1 5.0 2012 2013 2014 2015 2016 Spain has participated annually in the Aegon Retirement Readiness Survey for five years. In that time Spain s ARRI score has not made any appreciable improvement, dipping from 5.0 in 2012 to 4.4 in 2013, but has pulled back up to 5 and above for the past three years. Aegon Retirement Readiness Index Components The ARRI is based on responses to six survey questions, three broadly attitudinal and three broadly behavioral in nature. The Spanish respond much more positively to the attitudes contributing to the ARRI ( personal responsibility 57 percent, level of awareness 46 percent, financial understanding 48 percent) than they do to the behaviors contributing to the ARRI ( retirement planning 32 percent, financial preparedness 25 percent, income replacement 36 percent). Aside from personal responsibility (which has fallen from 64 percent in 2012 to 57 percent in 2016), there has been very little change in response to the component questions feeding into the Spanish ARRI with scores changing by no more than 3 percentage points since 2012. Chart 3 What factors shape the ARRI findings? Income replacement Personal responsibility Do you think you will achieve the level of income you think you will need in retirement? 6 1 To what extent do you feel personally responsible for making sure that you will have sufficient income in retirement? Financial preparedness Thinking about how much you are putting aside to fund your retirement, are you saving enough? 5 2 Level of awareness How would you rate your level of awareness on the need to plan financially for your retirement? Retirement planning 4 3 Financial understanding Thinking about your own personal retirement planning How able are you to understand financial matters process, how well developed would you say that your when it comes to planning for your retirement? personal retirement plans currently are? 6 The Aegon Retirement Readiness Survey 2016
Chart 4 Spain: 5-Year trend: ARRI components The six index questions are answered on a five-point scale. Bars show the proportion of top two option (4 and 5) responses between 2012 and 2016. For the first five questions from top to bottom, workers were asked to rate their level of agreement with a statement, e.g., To what extent do you feel personally responsible for making sure that you have sufficient income in retirement? From code 1 I don t feel responsible at all through to code 5 I feel very responsible. Bars represent top-two options (4 and 5), for example, that workers feel somewhat or very responsible. For the sixth question, income replacement, workers were asked what proportion of their current income they expect to need in retirement, followed by Do you think you will achieve this income? This is answered on a scale from code 1 I don t know if I am on course to achieve my retirement income through to code 5 Yes I am on course to achieve my retirement income. The bars represent top-two options (4 and 5), that they are on course to achieve at least 75% of their needed retirement income. 1 Personal responsibility 2016 57% 2015 2014 54% 2013 46% 2012 60% 64% 2 Level of awareness 2016 2015 2014 2013 2012 33% 46% 50% 46% 44% 3 Financial understanding 2016 2015 2014 2013 2012 40% 48% 55% 53% 51% 4 Retirement planning 2016 2015 2014 2013 2012 18% 32% 34% 32% 29% 5 Financial preparedness 2016 2015 2014 2013 2012 16% 25% 26% 25% 26% 6 Income replacement 2016 2015 2014 2013 2012 36% 38% 33% 29% 37% The Aegon Retirement Readiness Survey 2016 7
Part 2 - Retirement readiness is a shared responsibility and it requires a shared solution With increased longevity, retirement is lasting longer and people are enjoying more time after their working life. Funding this longer retirement rests on three pillars firstly, governments must provide appropriate vehicles to invest in and guidance on how to do so, secondly, employers must engage with employees on planning their retirement as well as contributing their part financially. Finally individuals must take personal responsibility and put aside and invest a sufficient proportion of their salary. And start doing so in time. The majority (81 percent) of Spaniards agree that their government should bear the brunt of the expense for retirement by providing for them through social security, slightly greater than the average globally (75 percent). Spaniards are less eager to accept personal responsibility for funding retirement themselves (51 percent), well below the global average (62 percent). Two thirds (66 percent) of Spaniards agree on a balanced approach where the government, employer and worker each play an equal role. Chart 5 Spanish attitudes on how to fund retirement The government should provide for people through Social Security 81% Governments should encourage employers to automatically enroll all their employees into a retirement plan Employers should provide through retirement plan benefits It should be a balanced approach in which individuals, employers and the government all play an equal role 66% 72% 70% Individuals should save for themselves through private pensions / other investments 51% % that somewhat or strongly agree Of the 15 countries surveyed, Spaniards expect the most of their government, estimating that the government (through social security and other government benefits) will provide 64 percent of their income in retirement (well over the global average 46 percent). They expect far less to come from their employers or previous employers compared to the global average (12 percent and 24 percent respectively) and they expect less to come from their own savings and investments compared to the global average (24 percent and 30 percent respectively). However there is evidence that the high expectations Spaniards place on their government are set to soften. Younger Spaniards (age 20-29 and 30-39) expect less to come from the government (45 percent and 58 percent respectively), expecting more to come from their employers (24 percent and 15 percent respectively) and also more to come from their own savings and investments (31 percent and 27 percent respectively). 8 The Aegon Retirement Readiness Survey 2016
Chart 6 Expected proportion of retirement income by three broad sources 30% 24% 46% 24% 12% 64% Your own savings & investments, including IRAs Your employer / previous employers (through workplace retirement plans) The government (through social security & other government benefits) Total Spain Part 3 Habitual saving is critical for success The importance of habitual saving cannot be stressed enough. People who save habitually are in a better position to plan for their retirement, feel more responsible, and have a better understanding of what retirement will mean for them financially. It is discouraging to find that the proportion of Spanish workers who save habitually for retirement is only just over one quarter (27 percent), which is significantly lower than the global average (38 percent) and the proportion of past savers in Spain is higher than the global average. Chart 7 Approach to saving for retirement Global 6% 21% 12% 23% 38% HABITUAL SAVERS - I always make sure that I am saving enough for retirement OCCASIONAL SAVERS - I only save for retirement occassionally from time to time PAST SAVERS - I am not saving for retirement now, although I have in the past Spain 8% 23% 18% 24% 27% ASPIRING SAVERS - I am not saving for retirement though I do intend to NON SAVERS - I have never saved for retirement and I don t intend to The Aegon Retirement Readiness Survey 2016 9
The pattern of habitual savings has not changed since 2012, with the exception of 2013 when the level dipped down by 7 percentage points, only to rebound in 2014 to the same level as 2012, and remain there through to 2016. Chart 8 Spain s habitual savers: 5-Year trend 26% 19% 27% 28% 27% 2012 2013 2014 2015 2016 The two key triggers that prompt Spanish savers to initiate saving for their retirement are lifestage prompts (44 percent) and employment-related prompts (26 percent). Turning a certain age (29 percent) and starting a family (15 percent) are key lifestage prompts to make workers start saving for their retirement while an employer starting to pay into a retirement plan (10 percent) and starting a first job (7 percent) are key employment-related prompts to workers starting to save for their retirement. Chart 9 What prompted retirement saving among savers and intenders NET: Life stage reasons 44% I turned a certain age 29% I started a family 15% I got married 7% I got separated / divorced 3% NET: Employment-related reasons 26% Employer started paying into a retirement / pension plan for me 10% I started my first job 7% I started a new (not first) job 6% Employer offered matching contribution retirement plans 5% Automatically enrolled into employer's retirement plan/ pension 4% There are three key factors that would motivate Spaniards to save for retirement: A pay raise (43 percent) would have the most impact, a more certain economic environment (34 percent) and more generous tax breaks (24 percent) for their long-term investments follow. Few Spaniards think having access to professional advice (12 percent) or financial education (14 percent) would motive their saving. 10 The Aegon Retirement Readiness Survey 2016
Part 4 Making it easy and more convenient to save Workplace retirement plans can provide the impetus needed to start people saving for their retirement. Automatic enrollment into a workplace retirement plan, whereby workers are automatically enrolled and a set proportion of their salary is invested into a retirement plan, has wide appeal globally and offers a perfect opportunity for those who are unable to save or prepare for their retirement. It is retirement saving made simple- the money is taken out of their pay check before the opportunity to spend if for other purchases arises. They won t notice the deduction as much as if they have to do they had to handle that transaction themselves or keep track of their portfolio on their own. Although three-in-five (59 percent) Spaniards find auto-enrollment appealing at a six percent contribution rate and 55 percent find the idea appealing at an eight percent contribution rate, this is some way below the global averages (65 percent and 61 percent respectively). In fact of all the countries surveyed; the Spanish are among the most resistant to auto-enrollment with 19 percent finding it unappealing at a 6 percent contribution rate (compared to 11 percent globally) and 21 percent finding it unappealing at an 8 percent contribution rate (compared to 13 percent globally). The most vulnerable Spaniards, those who are most susceptible to not having the opportunity to achieve proper retirement readiness, would particularly benefit from this more structured approach in their workplace retirement plans. Unfortunately for these groups, there are often more immediate concerns such as caring for family members and paying the bills which often takes precedence over more distant priorities such as retirement planning. Women, for example, are more likely to take on family responsibilities and consequently may only have the opportunity to work on a part-time basis, earning a significantly lower salary than working full time. With less money, this may account for the a lower level of appeal among women for auto-enrollment- 54 percent at a six percent contribution level and 52 percent at an eight percent contribution level. Chart 10 The appeal of auto-enrollment Global 61% 65% Very or Somewhat appealing at 6% of annual salary Very or Somewhat appealing at 8% of annual salary Spain 55% 59% The role of workplace retirement plans The workplace is the perfect vehicle for encouraging retirement savings yet only one-in-five (21 percent) of all Spanish workers feel their employers provide enough information and support to help with their retirement planning. Spanish employers fall seriously short in providing services to help their workers prepare for their retirement. Half (49 percent) of Spanish workers say they receive no services for retirement planning from their employers. Only twelve percent say they receive educational material, one-in-ten or less say they receive an annual retirement plan income forecast (10 percent) or an annual retirement plan statement (9 percent), suggesting that improving the flow and the quality of information on retirement planning on the part of employers would be an important first step forward in encouraging workers to save. The Aegon Retirement Readiness Survey 2016 11
Easy access to clear and concise information is a key component to staying engaged with one s savings and investments- particularly those that are intended to be used in retirement which is decades away for most savers. Moving to a digital platform is the most logical and convenient step for both employers and employees to manage retirement savings, but it is bewildering that in 2016 incredibly few Spanish workers conveyed that their employers offer them digital services. Only 9 percent of working Spaniards enjoy access to online retirement modelling tools, while very few (6 percent) have digital access to view and manage retirement savings or have access to webcast meetings or seminars about saving for retirement. Only 5 percent have access to company sponsored blogs or online network groups. Yet when workers are offered digital services, a majority find them to be extremely or very helpful. Chart 11 Few workers are offered digital tools to help them prepare for retirement Retirement Percentage of workers offered this service Percentage who find the service very / extremely helpful (among those offered) Online retirement modeling tools Digital access to view / manage retirement savings 9% 73% 6% 70% Webcast meetings/seminars about pensions/saving for retirement 6% 60% Company-sponsored blogs and/or online network groups 5% (low base size) Most Spanish workers receive fundamental workplace benefits from their employers vacation or paid time off and a basic salary. Three-in-five have a convenient workplace location (62 percent), 56 percent receive overtime or bonus pay. Only two-in-five receive medical health insurance (42 percent). There is little evidence of a strong support system from employers that would motivate workers to plan for retirement. Less than a quarter of Spanish workers are offered a phased retirement or other employer programs providing for a transition into retirement (23 percent), even fewer are offered a retirement plan with employer contributions or a retirement plan without employer contributions (19 percent, respectively). 12 The Aegon Retirement Readiness Survey 2016
Chart 12 Workplace benefits offered by Spanish employers Percentage of workers offered this service Vacation/ paid time off 84% Basic salary 79% Convenient location of workplace 62% Overtime and bonus pay 56% Opportunities for career progression 46% Access to good training provision 45% Flexible working hours 44% Medical health insurance 42% Ability to work past the normal retirement age 30% Life insurance 29% Phased retirement or other employer programs providing for a transition into retirement 23% Retirement plan with employer contributions 19% Retirement plan without employer contributions 19% The Aegon Retirement Readiness Survey 2016 13
Part 5 The imperative for retirement literacy and planning A written retirement strategy is not merely a set of hand written notes but often the result of a well thought out plan in which future retirees have considered what their retirement life should look like and how they can fund it. Half (50%) of Spanish workers have a retirement strategy and one-in-five (20 percent) have it in writing which is a 4 percentage point increase since 2013. This exceeds the global average where only 13 percent have a plan in writing. Young Spaniards between the ages of 20 and 39 are least likely to have written retirement strategies - just 11 percent among those age 20-29 and 13 percent among those age 30-39. But more Spaniards reaching pre-retirement age of 55+ have their plans set in writing (33 percent). Chart 13 Spanish workers with a retirement strategy 45% Written plan 25% 27% 28% 30% Non written plan 16% 19% 20% 20% 13% 2013 2014 2015 2016 2016 Global The most vulnerable groups - women, part time workers, lower income earners and people with the least education are less likely to have had the opportunity to formulate a strategy to prepare financially for retirement - written as well as not written. For example, almost two-in-five (39 percent) of low income earners have any type of retirement strategy compared with half (50 percent) of all Spanish workers. Chart 14 Women, the young, part time workers and those on a low personal income are all less likely to have a retirement plan, written or not written Total Women Young (age 20-29) Work part-time Low income (personal) Low education (less than undergrad degree) Aspiring savers Nonsavers I have a written plan 20% 19% 11% 13% 13% 16% 1% 4% I have a plan, but it is not written down 30% 22% 34% 24% 26% 31% 12% 7% I do not have a plan 45% 52% 49% 57% 54% 46% 78% 80% Don t know 5% 7% 6% 6% 7% 7% 9% 9% 14 The Aegon Retirement Readiness Survey 2016
Less than a quarter (23 percent) of Spanish workers say they have a backup plan that will provide an income should they become unable to continue working. In the event they are unable to continue working, over half (54 percent) will dip into their personal savings. A quarter (26 percent) will rely on their spouse or partner s income. One-in-five will use government unemployment insurance (22 percent) or an inheritance (21 percent). Chart 15 Just under two-thirds of all Spanish workers have failed to establish a detailed backup plan Chart 16 Their backup plan includes Yes No Don t know 13% 23% My savings My spouse/partner working Government unemployment insurance Inheritance 22% 26% 54% 64% 21% Just under half (46 percent) of Spaniards are paying into life insurance coverage. This is consistent across all age groups. Of those who carry it say the most important considerations for life insurance are the level of coverage (40 percent), and equally, cost/ premiums and clear and easy to understand products at 31 percent. Spaniards who don t have life insurance say either they can t afford it (32 percent) or that they simply never thought about it (28 percent). Spaniards started making contributions to the statutory pension system at an average age of 22, as is common for all age groups and were already, on average, three years into their working career at the time. The Aegon Retirement Readiness Survey 2016 15
Part 6 It s personal: Making the case for the new flexible retirement Spaniards are split in their vision for retirement. Almost half (48 percent) do not plan to carry on with their work and will immediately stop working once they hit retirement age. Others (39 percent) intend to work in some capacity. One-in-five (19 percent) will change the way they work (e.g. working part-time or on temporary contract) but only for a while before they eventually give up paid work altogether, while 7 percent will change the way they work (e.g. working part-time or on temporary contracts) but will continue to work to some capacity throughout retirement. Thirteen percent will continue to work as they currently do, retirement age won t make any difference to the way they work. The foremost reason for continuing to work at retirement age above all others is that they want to keep active and keep their brain alert (47 percent). Others show concern that Social Security benefits will be less than expected (37 percent), some have general anxieties about retirement income and whether their savings will last (34 percent). Some Spaniards simply enjoy their work, and see no reason to stop at retirement age (28 percent). Chart 17 Spaniards are split between immediate retirement and working into retirement Other / Don t know 13% I will immediately stop working altogether and enter full retirement I will keep working as I currently do. Retirement age won t make a difference to the way I work I will change the way I work (e.g. working part-time or on temporary contracts) and I will continue paid work throughout retirement in some capacity 13% 7% 19% 48% I will change the way I work (e.g. working part-time or on temporary contracts) but only for a while before I eventually give up paid work altogether 16 The Aegon Retirement Readiness Survey 2016
Part 7 The promise of active living and healthy aging Two-in-five Spaniards (62 percent) describe their current health as excellent or good. Maintaining good health longer opens up possibilities for Spanish retirees to stay active, engage with their families and friends, travel, pursue hobbies, all of which are retirement aspirations. With that said, nearly half of all Spaniards (48 percent) are optimistic about maintaining good health well into retirement. This also opens up the door for individuals to stay in the workforce longer, something that two-in-five Spaniards envision doing. Chart 18 Spaniards are optimistic about good health in retirement Don t know Very pessimistic Very optimistic 14% 2% 5% 15% Somewhat pessimistic Somewhat optimistic 34% 30% Neither pessimistic nor optimistic The Aegon Retirement Readiness Survey 2016 17
Recommendations The world is ready for its retirement wake-up call. The fifth annual Aegon Retirement Readiness Survey finds no improvement in Spanish retirement preparedness since 2012 and around the world, many workers expect to rely heavily on government benefits and are not saving enough to adequately fund their retirement income needs. The reality is that people are living longer than ever before, yet inadequate attention is being given to address the costs and implications associated with increased longevity. Governments, employers, and individuals must continue to expand upon actions that have proven effective while innovating new solutions for the future. With the Spanish retirement eligible age set to increase to 67 for both men and women by 2027¹, Spaniards need to consider whether the government will be able to fund 64% of their retirement income. They will need to assume greater personal responsibility in saving either directly or through company plans. 1. Employers should be encouraged to set up employer retirement savings plans. Policymakers should work to increase incentives to employers, remove barriers to setting up plans, and opening them to all workers. Workers should be encouraged to save on a consistent basis through payroll deduction. Incentives to participate, such as employer or government matching contributions, will help draw attention to the benefits of deferring a portion of salary into an employer-sponsored retirement plan. Incentives, however, may not by themselves be enough to change behavior. Employers should provide for workers to be automatically enrolled into a workplace plan. Automatic enrollment is an effective nudge to start workers on a consistent long term savings program. 2. Currently, very few Spanish employers are taking advantage of the digital tools that are available to help promote good retirement planning and management among their workers. This presents a missed opportunity in encouraging workers to save for retirement. If given easy and quick digital access to planning and management tools to enhance the retirement experience, workers would be more apt to become involved, take charge of their retirement planning, resulting in a better retirement planning journey. 3. Employers and workers should agree on triggers for automatic increased savings by payroll deduction (auto-escalation). Depending on when a worker started saving consistently and how long they have before retirement, the automatic enrollment default rate may not be adequate to provide sufficient retirement income. Increases in the amount people save can be made automatically at predetermined times, such as pay raises, or upon reaching a certain age. 4. Employers and governments should continue to promote financial literacy and raise awareness, not only of the need to save for retirement, but also how to invest long term savings, and the benefits of working longer. 5. Governments should consider engaging family and friends in their campaigns to help increase awareness of the benefits of establishing a retirement savings strategy, especially for those not covered by an employer-sponsored retirement plan. No age is too young or old to start. Parents can instill good savings habits in their children by teaching them how to budget and invest. 6. Parents and adult children can begin to discuss topics that are typically sensitive, such as getting one s legal affairs in order, inheritance, caregiving, and other financial matters. 7. Individuals should create a retirement strategy to fund retirement and manage their retirement savings to last a lifetime. A retirement strategy should be tailored to the individual s plans for retirement (e.g. travel, continued working, etc.), other possible sources of income in retirement, and the individual s health. Individuals should take advantage of any professional financial advice or other tools in modeling their retirement. Online tools and robo advice can help individuals assess the amount they will need to save and how to invest their savings. ¹ OCED Pensions at a Glance 2015 18 The Aegon Retirement Readiness Survey 2016
8. The retirement plan or strategy should help people to manage retirement savings to last a lifetime. Building up adequate retirement savings is one half of the solution. Individuals should also plan to manage their retirement savings during the decumulation phase to provide them an income for life that includes possible pension income and government benefits. Lifetime income can be achieved through a guaranteed lifetime income product (annuity) or through a combination of other solutions and/or products, without any guarantees. 9. Individual retirement strategies should also include a backup plan to enable the individuals to pay for unexpected expenses and events. A wide range of insurance products including life, income or critical illness policies, for example, can provide a costeffective way of helping individuals and their families in the event employment ends prior to expected retirement date because of an illness, disability or death. 10. Governments and employers should encourage individuals to work longer or, at a minimum, facilitate their working past normal retirement age. As many individuals and employers tie retirement age to the date of receipt of government retirement benefits, any increase in the age of entitlement (when people can draw on their social security pension) would likely influence a change in behavior and encourage individuals to work longer. 11. Employers can also facilitate workers remaining in the workforce past their normal retirement date by developing age-friendly workplaces and by implementing phased and flexible retirement options (e.g., flexible work arrangements, reducing hours, working in a different capacity). Employers are encouraged to consider the benefits of retaining older workers in the workforce, such as the experience they bring, their loyalty and understanding of the business. Employers and governments should facilitate continued training to enable individuals to maintain skills to perform their job. Individuals should take advantage of training and phased retirement programs and consider the benefits of remaining in the workplace (e.g., maintaining an active mind and body, fulfillment, community, increased income). 12. Finally, as individuals consider their preparedness for retirement, actions to keep healthy and active can increase their confidence in their retirement security and their ability to work longer. Employers should be encouraged to promote greater vitality through wellness programs in the workplace and governments and employers should consider incentives for healthy and active lifestyles. Disclaimer This report contains general information only and does not constitute a solicitation or offer. No rights can be derived from this report. Aegon, its partners and any of their affiliates or employees do not guarantee, warrant or represent the accuracy or completeness of the information contained in the report. Contact information Headquarters Aegon N.V. Strategy & Sustainability Mike Mansfield Manager Retirement Studies Telephone: +31 70 344 82 64 Email: mike.mansfield@aegon.com aegon.com/thecenter Media relations Telephone: +31 70 344 83 44 Email: gcc@aegon.com The Aegon Retirement Readiness Survey 2016 19
20 The Aegon Retirement Readiness Survey 2016