International Retirement Security Survey

Transcription

1 International Retirement Security Survey Country Summary October 21, 2005 BACKGROUND AND RESEARCH OBJECTIVES Income security during retirement is an increasingly important international issue in light of population aging, shrinking or slowly growing populations of working age, and public pension systems under stress. Life expectancy has been increasing, and, when coupled with early exit from the labor force, is resulting in longer periods of time spent in retirement. This period of retirement brings with it a significant international public policy challenge in ensuring that individuals have sufficient income security to live comfortably throughout their retirement years. Retirement income typically comes from three sources, although different countries rely more on some sources than others. One source is public funding, designed to guarantee through governmental transfers a minimum income standard during retirement. Another source consists of employer-provided pensions, while still another consists of private household savings. At the same time, the retirement income systems currently in place are affected by demographic forces such as the sheer number of individuals who will be retiring, the large 1

2 increases in older-age life expectancy throughout many developed countries, and declining ratios of workers to retirees. They are also affected by economic forces such as rising health care costs. For individuals, longer retirements mean stretching savings over more years. For society, they also mean that public pension and health benefits must also be paid for more years. To explore the issues central to retirement income security across various countries, AARP designed an International Retirement Security Survey. This survey examines key issues in retirement security across ten developed countries selected especially for their varying emphasis on the three potential sources of retirement income. These sources provide the income that, along with health care benefits and long-term care, foster economic security in old age. With this survey, we examine opinions about retirement security in the United States, Canada, Australia, Japan,, France, Italy, the United Kingdom, Sweden, and the Netherlands. Slightly over 4,000 respondents were included in this telephone survey (approximately 400 in each country) which was administered for AARP by Harris Interactive, an international research organization with field offices in each country used in this study. The primary goal of this study is to improve our understanding of attitudes and behaviors surrounding personal and national retirement issues, and to assess the public s confidence in having sufficient income to retire comfortably, attend to their health and long-term care needs, and live securely after leaving the workforce. The AARP International Retirement Security Survey interviewed respondents in the general population of each country age 30 to 65. Fieldwork was conducted from May 9th to June 2nd, Interviews were completed using computer-assisted telephone interviewing (CATI), and ranged from minutes in length. The margin of error for the total sample is ± 1., while within each country, the margin of error is ±. 2

3 SUMMARY OF FINDINGS FOR GERMANY Germans are more pessimistic about retirement (6) than citizens of any other country surveyed except Italy, even though they feel relatively well-informed about retirement issues. German respondents expect to rely more heavily than those in other countries on public pensions as their retirement income source (6), but they have little trust that their pensions will be there for future retirees. Unlike other countries, Germans are more divided on what would be the most acceptable means of addressing pension solvency problems. ATTITUDES TOWARD RETIREMENT: Germans give far more thought to retirement than their counterparts in most other nations, and feel relatively well-informed about what their retirement needs will be. Despite having given through to retirement and feeling well informed about retirement issues, only 35 percent of German respondents (versus 57 percent of the total) are somewhat to very optimistic about retirement. Thus, while they think more about retirement, it does not appear that this level of attention leads to a more positive outlook. EXPECTATIONS: A majority of Germans (5) plan to retire before age 64, although fewer expect they really will. Fewer Germans (only ) plan to retire early (before age 60) than any country surveyed. After retirement, over one in three Germans plans to stop work completely, a rate which lies somewhere between the lower extreme of the U.S. (1) and the higher extreme of Italy (5). RETIREMENT SAVINGS AND PLANNING: Almost two out of three Germans say they are on track or ahead in planning and saving for retirement. In spite of this, joins Japan, Italy, France and Sweden, with half or more of their citizens doubting they will have a financially comfortable retirement. Among the 31 percent who say they are behind with their saving, low income, raising children, and unemployment are the top reasons given. RETIREMENT HEALTH CARE: exhibits the absolute lowest rate of all countries studied of confidence in its government s ability to meet the current and future health care expenses of retirees. One-quarter of Germans have NO confidence in their 3

4 government s ability to provide these benefits. Nevertheless, half of all Germans say they expect their government to be responsible for all or most of their retirement health care costs. RELIANCE ON GOVERNMENT: Germans are the most likely among nations surveyed to say that public pensions will play a major role in financing their retirement. Over six in ten (6) say that most or all of their income will come from this source, compared to just 42 percent in other countries. To a much lesser extent, Germans also intend to draw on employee pensions (1) and wages (1). As is the case with other countries in the study, confidence in their government s ability to meet public pension requirements is low the lowest, in fact, of all countries surveyed. Most (7) feel that their country s public pension plan alone would not afford them a comfortable retirement. POLICY SOLUTIONS: Germans appear to have a markedly broader perspective compared to other nations on what are acceptable policy solutions for maintaining a viable public pension fund. While higher taxes on more highly paid workers is by far the most popular solution for nations overall, Germans are about equally likely to prefer all six of the survey s listed solutions, including raising taxes across the board, raising the retirement age, and increasing the labor force by admitting foreign workers. 4

5 VIEWS ON RETIREMENT Overall, Germans are highly pessimistic about retirement. Almost two-thirds of respondents from (6) stated that they were somewhat or very pessimistic about retirement, a rate comparable to that of France and Italy. Among the countries studied, has the highest proportion of those stating that they are very pessimistic (2). VIEWS ABOUT RETIREMENT By Country Net Optimistic 3 Net Pessimistic Very optimistic Somewhat optimistic Somewhat pessimistic Very pessimistic Dk/Ref US CAN UK AUS GER FRA ITA NLD SWE JPN Q: In general, thinking about retirement, are you? 5

6 THOUGHT GIVEN TO RETIREMENT Germans have given a great deal of thought to their retirement, significantly more than all other countries except the U.S., and in striking contrast to its close geographic counterparts of France and Italy. Forty-four percent of Germans say they have given a lot of thought to retirement, and another three in ten have given it some thought. HOW MUCH HAVE THEY THOUGHT ABOUT RETIREMENT By Country Net Some Thought 5 Net Little Thought 4 7 A lot of thought Some thought A little thought No thought at all DK/Ref US CAN UK AUS GER FRA ITA NLD SWE JPN Q: Overall, how much have you thought about your retirement. Have you given it? 6

7 FEELING INFORMED ABOUT RETIREMENT Germans feel relatively well-informed about retirement. Overall, on a scale of one to ten, with one being not at all informed and 10 being extremely well informed, 29 percent of Germans rate their knowledge as eight or higher, compared to one-quarter of all respondents in this study. HOW WELL INFORMED DO YOU FEEL YOU ARE? By Country US CAN UK AUS GER FRA ITA NLD SWE JPN extremely well informed Top 3 Box Mean Q: On a scale of 0-10, where 0 means not at all informed and 10 means extremely well informed, how informed would you say you do/did you feel about the things you need for a happy and successful retirement? When the mean scores of all the countries are compared, the Germans are one of the more informed countries, with an average score of 5.9 on the 10 point scale -- slightly above the total average of 5.7. Highest informed scores reside with the US (6.5), Canada (6.3), the Netherlands (6.0), with ranking 4th (5.9), while residents of Italy (5.4), Sweden (5.1), and Japan (5.0) and France are relatively uninformed about retirement. 7

8 PLANNED VS. EXPECTED RETIREMENT AGE While a majority of Germans (5) say they plan to retire before age 65, significantly fewer (4) actually did (or think they will) retire at that time. This gap between planned and expected retirement is found across most countries in this study, and probably reflects a pervasive insecurity about being able to afford a comfortable retirement. Compared to total respondents, the Germans are more likely to plan retirement between the specific ages of 60-64, with very few planning to retire earlier than age 60. For a complete breakdown by country, please refer to Tables 1 and 2 in the Appendix. PLANNED VS. EXPECTED RETIREMENT AGE RETIREMENT AGE PLANNED EXPECTED PLANNED EXPECTED 49 or younger (net) (net) (net) (net) (net) (net) (net) Never retire Don t know Q: Not Retired: At what age do you plan to retire? Retired: At what age did you think you were going to retire Q: Not Retired: At what age do you think you will actually retire? Retired: At what age did you actually retire? 8

9 CONFIDENCE IN RETIREMENT INCOME While Germans say they think a lot about their retirement, half of them report that they are not confident that they will be able to live comfortably in retirement for 25 years or more. Japan, Italy, France and Sweden join, with half or more doubting a comfortable retirement. These lower confidence ratings are generally consistent with corresponding low levels of optimism about retirement. Canada (7) and the Netherlands (7) top the list of countries in confidence that they will have the finances necessary for a comfortable retirement. CONFIDENCE IN COMFORTABLE RETIREMENT By Country Net Confident 4 Net Not Confident 5 4 Very confident Somewhat confident Not too confident Not at all confident Dk/Ref US CAN UK AUS GER FRA ITA NLD SWE JPN Q: How confident that you will have enough money to live comfortably in retirement for 25 years or more? 9

10 RETIREMENT PLANNING Germans are more likely than all other countries studied to say they are ahead in saving for their retirement. This fact is interesting in light of their relative pessimism about retirement. Sixty-four percent of Germans report that they are either on track or ahead of schedule in their planning and savings. also leads all other countries except Japan in residents who say that they are either a little or very much ahead in their planning. PLANNING AND SAVINGS FOR RETIREMENT By Country 6 Very much ahead A little ahead On track A little behind Very much behind Dk/Ref Net Ahead Net Behind US CAN UK AUS GER FRA ITA NLD SWE JPN Q: Overall, when it comes to planning and saving for retirement/thinking about how you planned and saved for retirement, would you say that you are/were? Those who admitted to being behind in their retirement planning were asked what factors were inhibiting them in reaching their savings goals. While most other countries most often cite as the reason they are behind is having low incomes, Germans are more likely than others to name a wider variety of reasons for being behind, including bad luck, the country s political situation, and short-term expenses. For direct country-by-country comparison, please see Table 3 in the Appendix. 10

11 REASON SAVINGS ARE BEHIND SCHEDULE (AMONG THOSE THAT ARE BEHIND)* Reasons Savings are Behind Schedule Top 10 Reasons Not enough income to allow me to save Raising a child or grandchild Unemployment Education expenses Saving for retirement isn t/wasn t a priority Did not realize how much I needed to save Spent money on shorter - term things Expenses of remodeling a home Mortgages for your home Health or medical expenses *Mentioned by 5 percent or more Q: What factors, if any, have been keeping you/kept you behind schedule in saving for retirement? 11

12 GOVERNMENT HEALTH CARE PROVISION While confidence is low across all countries surveyed in their government s ability to pay health care expenses in retirement, confidence is the lowest in. On a scale where zero represents absolutely no trust and 10 represents total trust, only 3 percent of Germans rated their trust in their government s ability to continue to provide health care benefits to current retirees as an 8, 9, or 10, and only two percent give this high rating for future retirees health care. In fact, one-in four Germans have zero confidence in their government s ability to meet retiree health care needs. CONFIDENCE IN GOVERNMENT S ABILITY TO PROVIDE HEALTH BENEFITS total trust in government absolutely no trust Mean Mean Mean Mean Q: How much trust do you have in your government s ability to provide health care benefits to CURRENT retirees? Q: How much trust do you have in your government s ability to provide health care benefits to FUTURE retirees? 12

13 German mean ratings are significantly lower on faith in government to provide both current (3.3) and future (2.9) retiree s health care needs when compared to the total averages (4.5 and 3.8, respectively). The highest government confidence levels for being able to provide health care benefits to retirees is evident in Canada (5.3 and 4.5), Australia (4.9 and 4.0), and Italy (4.9 and 4.1). CONFIDENCE IN GOVERNMENT S ABILITY TO PROVIDE HEALTH BENEFITS, BY COUNTRY (RATING 8, 9 OR 10) By Country US CAN UK AUS GER FRA ITA NLD SWE JPN Curr Future Curr Future Curr Future Curr Future Curr Future Curr Future Curr Future Curr Future Curr Future Curr Future Top 3 Mean

14 GOVERNMENT PENSION PROVISION German respondents are skeptical when asked about their government s ability to supply pension benefits for current and future retirees. Using a similar 10-point scale as a measure of trust, just nine percent give the government a rating of 8 or higher for provision to current pensioners, and even fewer (3 percent) for s ability to pay future pensioners. This compares with 17 percent and 7 percent respectively of the total sample. As was the case with trust in government to provide retirement health care, average trust scores for pension benefits are far lower in than in all of the countries examined. CONFIDENCE IN GOVERNMENT S ABILITY TO PAY PENSION BENEFITS CURRENT FUTURE total trust in government absolutely no trust Mean Mean total trust in government absolutely no trust Mean Mean Q: How much trust do you have in your government s ability to keep paying pension benefits to CURRENT retirees? Q: How much trust do you have in your government s ability to keep paying pension benefits to FUTURE retirees? 14

15 SELF-REPORTED HEALTH STATUS German respondents report their health status slightly below that of the total for this study. One quarter (2) report that they are in fair to poor health, with only Japan reporting poorer health (4). Thirty-eight percent of German respondents report being in very good or excellent health, versus 50 percent for the total study population. GENERAL STATE OF HEALTH By Country Net Good 7 Net Poor 2 7 Excellent Very good Good Fair Poor US CAN UK AUS GER FRA ITA NLD SWE JPN Q: In general, would you say your health is? 15

16 HEALTH CARE FINANCING IN RETIREMENT In sharp contrast to their doubts about the government s ability to deliver on expected health care provision in retirement, half of all Germans (compared with 3 of respondents in total) expect their government to pay all or most of their retirement health care costs. As is true in other countries, almost three in four Germans believe they will have more than one source of health care coverage in retirement, such as personal savings, family, and private insurance coverage. PARTY RESPONSIBLE FOR HEALTH CARE COSTS IN RETIREMENT Responsible for Support Government sponsored health care Your own savings or income Your family, or those taking care of you Private health insurance All Most Some of your healthcare costs in retirement Q: Do you think/does the following (will) pay none, some, most, or all of your health care costs in retirement? 16

17 Among Germans who name multiple sources of health care coverage, 43 percent expect the government to be the primary provider. SOURCE OF MOST HEALTH CARE COSTS IN RETIREMENT (AMONG THOSE MENTIONING MULTIPLE SOURCES) Which source will pay the most? US CAN UK AUS GER FRA ITA NLD SWE JPN Government sponsored health care Your own savings or income Your family, or those taking care of you 1 Private health insurance Q: (Among those naming multiple sources) You indicated that two or more items (will) pay some or most of your health care costs in retirement. Which one do you think pays/will pay the most? 17

18 SOURCES OF RETIREMENT INCOME When asked to name expected sources of retirement income, 42 percent of respondents across all countries surveyed cite public pensions as a major source. However, 61 percent of Germans name a public pension, one of the highest proportions among all countries studied, eclipsed only by Italy (6). For a complete breakdown by country, please refer to table 4 in the Appendix. Germans are also much less likely than other countries to name any of the next four most common retirement income sources: employer-provided pensions, earnings, workplace retirement programs and personal savings/investments. EXPECTED MAJOR SOURCES OF INCOME IN RETIREMENT Sources of Income in Retirement Public pension Employer-provided/occupational pension Earnings from employment Workplace retirement savings program Other personal savings/investments One time payment from your employer Sale or refinancing of your home 13 An inheritance Support from children/family Q: For each, please tell me if you expect it to be/it is a major, minor, or not a source of income for you/when you retire? 18

19 ADEQUACY OF PUBLIC PENSIONS Respondents were asked to evaluate the comfort level that could be afforded for the average retiree based on his or her country s public pension plan. Across all countries examined, an overwhelming majority (7) of those surveyed feel that their country s retirement plan would not provide a comfortable lifestyle. The corresponding proportion in is similar, at 79 percent. LEVEL OF COMFORT OFFERED BY PUBLIC PENSIONS By Country 1 Very comfortably Net Comfortable Net Uncomfortable 7 2 Comfortably Not very comfortably Not at all comfortably DK/Ref US CAN UK AUS GER FRA ITA NLD SWE JPN Q: Do you believe that in, the average retiree s pension and benefits paid by the government, excluding personal sources of retirement income like savings or wages, are sufficient for the average retiree to live? 19

20 EXPECTATIONS FOR WORK IN RETIREMENT Overall, approximately two-thirds of respondents expect their life after retirement to include work in some form. Germans are more likely than some other countries to say they will stop working completely (3 of Germans compared with 1 of Americans and 1 of Canadians and Japanese, and 3 of total respondents), but less likely than France (4) and Italy (5). Two in ten plan to work part-time, comparable to the total population surveyed. For a complete breakdown by country, please refer to table 5 in the Appendix. EXPECTATIONS FOR RETIREMENT Stop work completely 3 3 Work part-time Serve as a volunteer Alternate between periods of work and leisure Take educational courses or workshops Work full time in some type of work Work full-time but in a different type of work Q: Which ONE of the following do you see yourself doing in your life after retirement? 20

21 POLICY SOLUTIONS The pessimism of many country s respondents, including those in, suggests that many perceive serious problems in current government policies relating to retirement. Respondents were asked to rate the favorability of several possible policy actions to remedy the funding shortfall anticipated by an ever-increasing proportion of the population living in retirement. Among all countries studied, increasing taxation on the highest-paid workers appears to be a favored option (6). Germans are far less in favor of this approach (4), and are more inclined to endorse increasing immigration (5), higher taxes for all (5), and raising the retirement age (4) than any individual country as well as the total surveyed. The relative parity of acceptance in for each of these policy options indicates no leading candidate as a solution at the national level. POLICY SOLUTIONS Raising taxes among higher paid workers 4 6 Raising taxes for all those in the workforce Raising the retirement age required to qualify for public pensions Increasing retirement benefits at a lower rate than in the past Increasing the size of the labor force by allowing more immigrants into the country to work Shifting to private savings accounts Top 2 Box Acceptance (Completely/Somewhat Acceptable) Q: In the future, as the number of elderly people increases, the government may need to make difficult choices in order to maintain public pension funds. For each of the following choices, please tell me if it is acceptable or not acceptable to you. 21

22 CONCLUDING COMMENTS Global increases in longevity and rising health care costs mean that government spending for retirement and health programs will put increasing pressure on government budgets. While the findings of this survey show that in general people in ten developed countries view their retirement with guarded optimism, German residents tend to be more pessimistic toward their retirement than most. A surprising number of respondents across all ten countries have given their retirement little or no thought, and a large proportion do not feel very well informed about the things they need for a happy and successful retirement. In these regards, Germans have given comparatively more thought to retirement than other countries, and they feel relatively highly informed, ranking fourth after the U.S., Canada, and the Netherlands. By comparison with other countries, far fewer Germans plan to retire before age 60. The French, Australians, and Canadians are much more inclined to plan early retirements. While many of those surveyed in all countries expect that public pensions and health care benefits will play a primary role in their retirement security, Germans differ in that they are far more likely to expect this. Residents of all countries surveyed also lack solid confidence that their governments will be able to provide these benefits in the future, and many are therefore not confident that they will have enough money to live comfortably through retirement. Results show that Germans are even less confident than most other countries. A variety of alternatives are named by Germans when asked what source they expect will pay for their health care costs in retirement. Approximately three in four expect more than one source of payment for health care in retirement, and among these, most say they will rely primarily on a government-sponsored plan. While half of all Germans expect the government to pay all or most of their health care, only one-third of the total respondents have this expectation. With regard to policy solutions, respondents in general see more taxes from higher income persons to support public pension systems as an acceptable remedy to the fiscal strains these 22

23 systems face, but Germans differ on the primacy of this solution. German respondents are equally likely to favor a variety of solutions to the pension solvency problem, suggesting a more divisive political battle when actually implementing a solution. The overall challenge for all governments will be to make a genuine effort to promote greater understanding of retirement security issues, open a real debate, engage their citizens in finding and agreeing to solutions and to close the gaps between the current situation, the future outlook, and the preferences and expectations of their populations. While the citizens in these countries do not view government as the sole source of support for the elderly, they still expect government to be a significant source of support in their old age. Governments in developed countries need to build confidence that they will meet their future commitments by preparing now for their rapidly growing aging populations. 23

24 FOR FURTHER INFORMATION: LADAN MANTEGHI AARP INTERNATIONAL AFFAIRS

25 APPENDIX I ABOUT THE RESPONDENT Age Age Age AGE The age profile of the German respondents closely parallels that of the study population as a whole. Age Age EMPLOYMENT STATUS, INCOME, AND MARITAL STATUS The employment pattern for parallels that of the total sample. Germans are much more likely to withhold income information, however. German participants are more likely to be widowed and less likely to be married than respondents as a whole. Employment Status Income Marital Status 6 6 Employed Less than $40,000 USD $40,000 or more USD 6 5 Married Retired Not Working Refused Living w/ partner Divorced/Separated Widowed Single Global Global Global 25

26 APPENDIX II TABLE 1: PLANNED RETIREMENT AGE US CAN UK AUS GER FRA ITA NLD SWE JPN 49 or younger (net) (net) (net) (net) (net) (net) 75+ Never retire Don t know Q: Not Retired: At what age do you plan to retire? Retired: At what age did you think you were going to retire TABLE 2. EXPECTED RETIREMENT AGE US CAN UK AUS GER FRA ITA NLD SWE JPN 49 or younger (net) (net) (net) (net) (net) (net) Never retire Don t know Q: Not Retired: At what age do you think you will actually retire? Retired: At what age did you actually retire? 26

27 TABLE 3: REASONS SAVINGS / PLANNING IS BEHIND SCHEDULE By Country Reasons Behind Schedule US CAN UK AUS GER FRA ITA NLD SWE JPN Not enough income to allow me to save Education expenses Raising a child or grandchild Saving for retirement isn't/wasn't a priority Unemployment Mortgages for your home Did not realize how much I needed to save Health or medical expenses Spent money on shorter - term things 1 1 Expenses of remodeling a home 1 Transportation or car expenses 1 1 Expenses of caring for family members/relatives * Credit card debts * By Country Major Sources of Income TABLE 4: MAJOR SOURCES OF INCOME US CAN UK AUS GER FRA ITA NLD SWE JPN Employer - provided/occupational pension Workplace retirement savings program One time payment from your employer Other personal savings/investments Sale or refinancing of your home Earnings from employment Support from children/family An inheritance Public pension (Japan includes basic state pension and employee pension insurance) * 27

28 TABLE 5: EXPECTED ROLE OF WORK IN RETIREMENT US CAN UK AUS GER FRA ITA NLD SWE JPN Stop working completely Work full - time in the same type of work 1 Work full - time but in a different type of work Work part - time Alternate between periods of work and leisure Serve as a volunteer Taking educational courses or workshops 1 1 Don t know * 1 Q: Which ONE of the following do you/did you see yourself doing in your life after retirement? TABLE 6: POLICY OPTIONS Top 2 Box Acceptance (Completely/Somewhat Acceptable) US CAN AUS UK GER FRA ITA SWE NLD JPN Raising taxes among higher paid workers Raising taxes for all those in the workforce Increasing the size of the labor force by allowing more immigrants into the 4 country to work Raising the retirement age required to qualify for public pensions Increasing retirement benefits at a lower rate than in the past Shifting to private savings accounts Q: In the future, as the number of elderly people increases, the government may need to make difficult choices in order to maintain public pension funds. For each of the following choices, please tell me if it is acceptable or not acceptable to you. 28