The Aegon Center
for Longevity and Retirement completed its seventh Annual Aegon Retirement
Readiness Survey, The
New Social Contract: a blueprint for retirement in the 21st century This report examines retirement insecurities at a
time in history in which megatrends are changing how people live, work, age,
and retire.
The idea of a ‘social contract’ has been
central to retirement systems in many countries around the world and has been
since Germany became the first nation in the world to adopt an old-age social
insurance program in 1889.
A social contract is an arrangement involving
three pillars (or three-legged stool) including governments, employers, and
individuals – each with a specific set of expectations and responsibilities.
When established these social contracts emphasized government and employer
retirement-related benefits and, to a lesser extent, the need for personal
savings.
When these retirement systems were created,
life expectancies were typically 65 years for most workers, which also happened
to be the age of entitlement. Since then, the age of entitlement has remained
largely unchanged, but life expectancies have increased significantly in most
countries.
Today, due to increases in longevity and
population aging, government-sponsored retirement benefits are under severe
financial strain. Traditional defined benefit pension plans offered by
employers are disappearing and being replaced by employee-funded defined
contribution retirement plans.
With these shifts, individuals are expected to
take on increasing risk and responsibility for self-funding a greater portion
of their retirement. However, many are inadequately equipped to successfully to
do so, and many are therefore at risk of not achieving a financially secure
retirement.
This report examines the global megatrends
shaping retirement and finds:
· Increases
in longevity and population, ageing are megatrends that are placing a growing financial strain on social security safety nets as well as workplace benefits
such as defined benefit retirement plans.
· Technology
is changing the way people live and work. Flexible labour markets no longer mean
a job-for-life. All of these changes and others impact retirement, which is
recognized by some but not all of today’s workers:
· Globally,
the most frequently cited megatrend impacting people’s plans for retirement is
the reduction in government benefits (38 percent). The second most frequently
cited is increased life expectancy (27 percent), followed by volatility in
financial markets (24 percent).
· Of
concern to the researchers is that relatively few survey respondents
acknowledge any megatrends as impacting their retirement planning, especially
megatrends relating to employment trends, technology and the financial markets
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