Heightened Need for Retirement Security Felt Globally

However, attitudes about retirement differ between developed and developing economies

By Roy Maurer Oct 9, 2014
Workers from all over the world increasingly prioritize retirement security, however, when it comes to retirement expectations, the views of employees in developing and developed economies differ greatly, according to a survey by global professional services company Towers Watson.

Towers Watson’s 2013/2014 Global Benefit Attitudes Survey of more than 22,000 employees in 12 countries found that the majority of respondents, and older workers in particular, increasingly recognize the need to save more for retirement. The countries included in the survey (Australia, Brazil, Canada, Chile, China, Germany, India, Japan, Mexico, the Netherlands, the U.K. and the U.S.) account for more than 60 percent of global gross domestic product and more than 80 percent of global retirement plan assets.

Retirement security has become a higher priority for the majority of respondents, the survey found. Between 65 percent and 89 percent of respondents across countries and demographic groups acknowledge needing to save more in general. A majority of workers also said that there is a five-to-10 percentage point gap between what they think they should save and what they are saving as a percentage of salary.

Retirement Confidence Divergence

Notably, the survey found that:

*Between two-thirds and three-fourths of respondents in developing economies such as Brazil, Chile, China, India and Mexico expect ongoing economic growth to deliver higher standards of living to future generations of retirees.

*Conversely, in developed economies such as Australia, Canada, Germany, Japan, the Netherlands, the U.K. and the U.S., only 20 percent to 40 percent of workers said they expect to enjoy the same or better standards of living in retirement compared to earlier generations.

*About two-thirds of employees from the developed countries believe their financial resources will support 15 years of retirement, but less than half are confident their assets will support a 25-year retirement.

As a result, many employees in developed countries are expecting to delay retirement until age 70 or later, especially in countries further along the transition from defined benefit (DB) plans to defined contribution (DC) only plans.

“In part, the expectation of longer careers in developed economies reflects longer life expectancy and governmental pension reforms that have raised retirement ages, but the transition from defined benefit to defined contribution-only retirement provision also seems to be playing a significant role,” said Jonathan Gardner, a senior economist at Towers Watson and co-author of the survey report.

“In many countries, employees seem uncomfortable with the greater risks they bear as a result of the shift to defined contribution plans only and less generous defined benefit plans,” he added.

Additionally, the survey found a lack of confidence in publicly financed programs. Less than a quarter of employees in developed economies agreed with the statement “I am confident that when I retire Social Security will be at least as valuable as today.”

Many employees also noted concern about the affordability of medical costs in retirement. More than half of employees in Brazil, Chile, Mexico, India and the U.S., and slightly less than half in Australia, China and Japan agreed with the statement “I am concerned I will not be able to afford my medical expenses when I retire.”

When Can I Retire?

Given the pessimism over being able to afford expenses once retired, combined with limits on how much can be saved, when do employees expect to retire?

In most of the developed economies, between one-third and nearly one-half of respondents have decided to extend their working years, often substantially. The average increase is five years in Australia and the U.S.; four years in Canada, Japan and the U.K.; and three years in Germany and the Netherlands. As a result:

*The average anticipated retirement age is now over 65 in Australia, the Netherlands, the U.K. and the U.S.

*The number of people expecting to work to age 70 and beyond is one-in-12 in Germany, one-in-eight in Japan, one-in-six in Canada and the Netherlands, one-in-four in the U.K., and nearly one-in-three in Australia and the U.S.

“The percentage of employees planning to work past age 70 is highest in those developed countries furthest along the DB-to-DC transition,” said Gardner. “Revised expectations may partly reflect the more realistic understanding that comes with age, as well as downward trends in the generosity of employer and governmental retirement benefits,” he noted.

In developing economies, on the other hand, most workers haven’t changed their anticipated retirement age over the last three years, and the majority of those who have expect to retire sooner rather than later, with China being the exception, the survey found.

Fallback Plans

When asked what they would do should their anticipated retirement income fall short of their needs, most employees, especially those age 50 and older, responded they would choose to work longer. Many younger workers (and even older workers in China, India and Japan) said they would save more.

Those age 50 and older in the European countries surveyed were more likely to say they will simply retire on lower incomes.

Roy Maurer is an online editor/manager for SHRM.

Follow him at @SHRMRoy

Quick Links:

SHRM Online Global HR page

SHRM Online Retirement Plans Resource Page

Keep up with the latest Global HR news

Job Finder

Find an HR Job Near You
Post a Job


Find the Right Vendor for Your HR Needs

SHRM’s HR Vendor Directory contains over 10,000 companies

Search & Connect