Attitudes toward the Role of the Family, the Individual, and the State in Retirement Provision Survey Evidence from East Asia Richard Jackson Center for Strategic and International Studies OAP/FAD Conference on: Designing Fiscally Sustainable and Equitable Pension Systems in Asia in the Post Crisis World Tokyo January 9, 2013 GAPINDEX.CSIS.ORG/ASIA
CSIS East Asia Retirement Survey CSIS conducted a survey of retirement behavior and expectations in China, Hong Kong, Malaysia, Singapore, South Korea, and Taiwan. The survey was based on nationally representative samples in all countries except China, where the sample was limited to urban residents. The survey universe consists of main earners aged 20 and over and includes 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 expectations for retirement. 2
Attitudes toward Retirement Provision 3
Only small minorities believe that the extended family should have responsibility for retirement income. "Who, ideally, should be mostly responsible for providing income to retirees? Share of Respondents Saying Grown Children or Other Family Members. China 4% South Korea 5% Taiwan 7% Hong Kong 12% Malaysia 14% Singapore 22% 0% 5% 10% 15% 20% 25% 4
Declining family size may be one reason for low support for family responsibility for retirement income. Share of Respondents Aged 20-39 Who Neither Have Nor Expect to Have Children China 8% Malaysia 20% Singapore 26% Taiwan 28% South Korea 31% Hong Kong 48% 0% 10% 20% 50% 5
More individualistic western values are also beginning to compete with traditional Asian values. Share of Respondents Saying Both Parents and Children Would Be Happier If They Were More Independent and Self-Sufficient Singapore 20% Malaysia Hong Kong China 36% South Korea 52% Taiwan 56% 0% 10% 20% 50% 60% 6
In most countries, there is strong support for individual savings-based responsibility for retirement income. "Who, ideally, should be mostly responsible for providing income to retirees?" Share of Respondents Saying "Retirees Themselves, through Their Own Savings" versus Share Saying "Government" or "Grown Children of Retirees or Other Family Members" 70% 60% 53% Retirees Themselves Government Grown Children or Other Family Members 63% 50% 45% 31% 36% 37% 32% 31% 39% 22% 20% 10% 5% 7% 12% 14% 9% 4% 0% South Korea Taiwan Hong Kong Singapore Malaysia China 7
When asked to choose between individual and family responsibility, respondents favor individual responsibility. "If retirees do not receive any income from government or former employers, who, ideally, should be mostly responsible for providing them with income?" Share of Respondents Saying "Grown Children of Retirees or Other Family Members" versus Share Saying "Retirees Themselves, through Their Own Savings" 90% 80% 70% Grown Children or Other Family Members Retirees Themselves 72% 78% 60% 50% 45% 50% 56% 58% 34% 38% 31% 38% 23% 20% 16% 10% 0% China Singapore Hong Kong Malaysia Taiwan South Korea 8
Support for family responsibility for personal care for the frail elderly also appears to be weakening. "Who, ideally, should be mostly responsible for providing personal care to retirees when they need help with everyday living or are sick or disabled?" Malaysia Singapore China 11% 25% 31% 29% 29% 32% 29% 37% 42% Grown Children of Retirees or Other Family Members Retirees Themselves, by Paying for Caregivers Government, by Paying for Caregivers Taiwan 23% 24% 47% Hong Kong 16% 29% 48% South Korea 14% 23% 54% 0% 10% 20% 50% 60% 9
The Expectations of Future Retirees 10
In some countries, rates of multigenerational living are due to decline among future retirees. Share of Respondents Living or Expecting to Live with Grown Children when They Are Retired or Elderly Actual Share for Elderly 70% Expected Share for Current Workers Aged 20-59 63% 60% 50% 54% 57% 54% 51% 52% 42% 46% 35% 37% 20% 10% 10% 0% China Malaysia Taiwan Singapore Hong Kong South Korea 11
In all countries, future retirees expect to be much less dependent on the financial support of their children. Ratio of Respondents Who Are Net Recipients of Financial Support from Their Grown Children to Respondents Who Are Net Providers: Actual Ratio for Current Retirees Aged 60 & Over versus Expected Ratio for Current Workers Aged 20-59 South Korea 0.3 1.7 Taiwan 0.7 1.7 Current Workers China 0.5 1.8 Current Retirees Singapore 1.4 5.1 Hong Kong 1.4 10.0 Malaysia 2.4 16.0 0.0 2.0 4.0 6.0 8.0 10.0 12.0 14.0 16.0 18.0 12
In most countries, much larger shares of future retirees expect to receive benefits from the national pension system. Share of Respondents Who Receive or Expect to Receive Income from a National Pension System: Actual Share for Current Retirees versus Expected Share for Current Workers 100% 90% 80% 70% 60% 71% 59% Current Retirees Current Workers 72% 72% 60% 60% 82% 78% 88% 63% 90% 50% 47% 20% 10% 0% China South Korea Malaysia Taiwan Singapore Hong Kong * Figures refer only to basic pension system for urban employees. 13
Much larger shares of future retirees also expect to receive income from financial assets. Share of Respondents Who Receive or Expect to Receive at Least Some Income from Financial Assets When They Are Retired or Elderly, by Type of Asset: Actual Share for Current Retirees versus Expected Share for Current Workers Aged 20-59 Bank Deposits Insurance or Annuity Policies Stocks or Bonds Current Workers Current Workers Current Workers Current Current Retirees Retirees 20-39 40-59 20-39 40-59 20-39 40-59 Current Retirees China 66% 65% 38% 60% 48% 18% 32% 19% 4% Hong Kong 75% 58% 42% 75% 61% 21% 66% 41% Malaysia 45% 14% 39% 48% 29% 49% 58% 33% Singapore 72% 77% 67% 86% 77% 53% 65% 52% South Korea 61% 53% 38% 54% 50% 14% 20% 22% 13% Taiwan 76% 56% 58% 76% 63% 39% 42% 31% 27% 14
Most respondents have flexible attitudes toward work and retirement: Only small minorities believe that people should retire at a fixed age and not work again. "Which view about work and retirement comes closest to yours?" Share of Respondents Saying "People Should Continue Working as Long as They Are Able," Share Saying "People Should Be Free to Start and Stop Working Whenever They Are Able and Willing," and Share Saying "People Should Retire at a Fixed Age and Not Work Again" Retire at a Fixed Age 70% 60% 50% 47% 63% Work as Long as Able Be Free to Start and Stop Working 52% 47% 61% 65% 20% 21% 13% 24% 25% 23% 13% 37% 33% 17% 18% 10% 6% 0% China Hong Kong Malaysia Singapore South Korea Taiwan 15
Today s working generations expect to retire at later ages than today s retirees did. Share of Respondents Who Retired or Plan to Retire after Age 60: Actual Share for Current Retirees versus Expected Share for Current Workers* 80% 70% 60% Current Retirees Current Workers* 57% 61% 69% 73% 50% 48% 47% 36% 32% 32% 20% 17% 10% 8% 0% Malaysia China Singapore Taiwan Hong Kong South Korea *Excludes workers who do not plan to retire. 16
Very large shares of future retirees expect to receive income from a job or a business they own. Share of Respondents Who Receive or Expect to Receive at Least Some of Their Retirement Income from a Job or a Business They Own: Actual Share for Current Retirees versus Expected Share for Current Workers* Hong Kong 25% 35% Malaysia 37% 44% Current Retirees South Korea 51% Current Workers* Taiwan 47% 67% Singapore 76% China 58% 87% 0% 20% 60% 80% 100% *Excludes workers who do not plan to retire. 17
Directions for Policy 18
The Four-Fold Way Expand funded retirement provision. Reform policies of financial repression that prevent workers from earning a market rate of return on their savings Raise formal retirement ages and combat age discrimination Establish more robust floors of old-age poverty protection 19
Share of Respondents Saying Government Should "Require Workers to Contribute More to Pay for Government Retirement Benefits" versus Share Saying It Should "Require Workers to Save More for Their Own Future Retirement" 100% 90% 87% Contribute More 92% Save More 86% 89% 92% 80% 70% 71% 79% 69% 69% 60% 50% 44% 33% 36% 20% 10% 0% China Hong Kong Malaysia Singapore South Korea Taiwan 20
Average Annual Real Rate of Return on Worker Contributions to Pension Systems* 5.0% 4.5% 4.5% 4.0% 3.5% 3.0% 2.8% 2.5% 2.0% 1.5% 1.3% 1.0% 0.5% 0.0% Singapore: CPF 1987-2009 Malaysia: EPF 1999-2009 Hong Kong: MPF 2000-2010 * Mukul Asher (2012) and MPF 21
"If you could choose how retirement benefits will be paid to you when you retire, please indicate which of the following ways you would prefer to receive the benefits." 70% 66% 60% 50% All in Monthly Payments All in a Lump Sum 50% 50% 61% 36% 26% 27% 22% 20% 10% 8% 11% 11% 0% Singapore Hong Kong Malaysia South Korea Taiwan China 22
"As the population grows older and there are more retired people to support, please tell me whether you think the government should or should not do each of the following " Share of Respondents Saying "Government Should Raise the Retirement Age" Taiwan 29% China 42% Malaysia 49% Hong Kong 54% Singapore 60% South Korea 85% 0% 10% 20% 50% 60% 70% 80% 90% 23
Share of Respondents Who Worry about Being Poor and in Need of Money in Retirement: Actual Share for Current Retirees versus Expected Share for Current Workers 100% 90% 80% 70% 60% 50% 87% 73% 58% 58% 87% 51% 51% 65% Retirees Aged 60 and Over Current Workers 62% 50% 44% 33% 20% 10% 0% Malaysia Singapore South Korea Taiwan China Hong Kong 24