Retirement risk around the world

 A report Retirement System and Risk Management: Implications of the New Regulatory Order edited by Olivia S. Mitchell, Raimond Maurer, and J. Michael Orszag published in 2016 reached an interesting conclusion.

They used data from the Global Findex database, which illustrates how people save, borrow, make payments, and manage risk. It is the world’s most comprehensive dataset providing consistent measures of financial service usage across economies and over time. The data was collected in partnership with Gallup, Inc. and the Bill and Melinda Gates Foundation. The survey was carried out over the 2014 calendar year as part of the Gallup World Poll, which since 2005 has continually conducted surveys of approximately 1,000 people in each of more than 160 economies and in over 140 languages, using randomly selected, nationally representative sample. The patterns may change because of the Pandemic but they are still interesting.

The looming worldwide retirement crisis has policymakers scrambling to better understand how adults prepare financially for old age. They found that 24.8 percent of individuals around the world save for old age, with large regional differences: rates are above 35 percent in Organization for Economic Co-operation and Development and Environmental Action Program countries (EAP), 11.8 percent in UN Economic Commission for Africa, and below 10 percent in Sub- Saharan Africa, South Asia.

They also found a small gender gap in saving for old age overall, which is larger in developing counties. Most regions exhibit patterns of higher saving for old age among those with higher education, with EAP standing out as the sole exception. In every region except South Asia, employed adults are more likely to save for old age than unemployed adults.

Saving for old age also rises sharply among the 36–45 age group. Their findings also reveal large income disparities: adults in the top income centiles are far more likely, while the lowest income is much less likely, to save for old age. Adults who have an account at a bank or a financial institution are about 40 to 50 percent more likely to save for old age. On the country level, they also uncovered a significant and positive relationship between old age saving and the country’s generic saving propensity, English legal origin, and GDP per capita. Institutional arrangements also help when they enable greater trust in the financial system. 

Finally, they find a significantly positive relationship between the probability of saving for old age and pension coverage, the size of contributions, and contribution ratios. More affordable housing is positively related to saving for old age everywhere except Sub-Saharan Africa. They interpret this as evidence suggesting little substitution between pension system provisions and contribution rates, other forms of financial saving, and saving for old age.