12th November 2013
Are young people failing to save for retirement because of a lack opportunity to do so? Pension firm Aegon argues that this is the case and that it applies internationally.
It has surveyed young employees in 12 countries with the report written in collaboration with the Transamerica Center for Retirement Studies. It has evaluated the state of retirement preparedness among young employees in countries around the world.
“The Changing Face of Retirement: The Young, Pragmatic and Penniless Generation” found that future retirement shortfalls among employed young adults between the ages of 20 and 29 will likely be due to a lack of opportunity to save, rather than a lack of will.
The report suggests that young people also require the support of employers, retirement providers and governments to help meet their retirement goals.
Initiatives that would make a difference include ensuring financial information is straightforward and user-friendly, financial products meet modern lifestyles, more generous tax breaks on long-term savings and retirement plans, and employer benefits.
It also suggests contemporary employment patterns demand flexible savings products like portable retirement benefits.
59% of working adults between the ages of 20 and 29 expect to be worse off financially in retirement than their parents (59%), and believe they must take on more financial responsibility, including funding their own retirement.
37% believe that they will likely fall short of their retirement needs, including 27% who believe that their shortfall will be half of what they think they need.
44% are pessimistic that they will not be able to choose when to retire, a luxury enjoyed by many of their parents.
28% expect to provide financial support for retired parents, and 40% agree that ‘adult children of retirees should help provide financial support for their parents if needed.’
Two thirds of young employees are committed to or have the ambition to save for their retirement.
A core 25% of young employees are habitual savers who ‘always make sure’ that they are saving for retirement, and a highly encouraging 41% of young employees are ‘aspiring’ savers who intend to save.
57% of young employees believe that retirement savings are important, but not a priority for them at the moment.
26% say that ‘better and more frequent information about my retirement savings’ would encourage them to save more for retirement, 23% cite ‘access to a professional advisor with personal recommendations,’ and 22% want ‘financial education so I am more aware of what I need to do for myself.’
Young employees place a high value on occupational benefits, with 87% believing a workplace retirement plan with employer contributions would be an important factor when choosing their next job.
A third (33%) of young employees would be encouraged to save for retirement by matched retirement contributions from their employer. Again, clarity and insight are themes, with 24% stating that access to simpler investment products would increase their propensity to save.
34% stated that more generous tax breaks on long-term savings and retirement plans would encourage them to save.
The Changing Face of Retirement: The Young, Pragmatic and Penniless Generation polled employees and retirees in 12 countries: Canada, China, France, Germany, Hungary, Japan, the Netherlands, Poland, Spain, Sweden, the United Kingdom, and the United States. Respondents were interviewed using an online panel survey in their native language between January and February of 2013. The sample comprised of 10,800 employees, including 2,722 people between the ages of 20 and 29, and 1,200 retirees. The 12 countries surveyed represent employees who cumulatively have access to around 85% of the world’s private retirement assets (excluding government retirement benefits).