Almost half of today’s workers and retirees believe that future generations of retirees will be worse off than those currently in retirement (49 percent globally, 46 percent U.S.), according to findings from new global research. The New Social Contract: A Blueprint for Retirement in the 21stCentury is based on a 2018 survey of 16,000 workers and retirees in 15 countries spanning the Americas, Europe, Asia, and Australia.
“Megatrends are disrupting long-standing societal constructs including how people live and work, plan for their future, and, ultimately, prepare for their retirement,” said Catherine Collinson, CEO and president of Transamerica Institute. The survey asked workers and retirees about global trends that are impacting their plans for retirement. Globally, the five most frequently cited trends are:
- Reductions in government benefits (38 percent global, 26 percent U.S.)
- Increased life expectancy (27 percent global, 25 percent U.S.)
- Volatility in financial markets follows (24 percent global, 22 percent U.S.)
- Changes in labor markets (21 percent global, 14 percent U.S.)
- Prolonged low interest rate environment (20 percent global, 14 percent U.S.)
“A new social contract for retirement is needed at this time when megatrends are disrupting how people live, work, and prepare for a secure retirement,” said Collinson. “Forging a new social contract brings about exciting opportunities to incorporate cutting-edge innovations that encourage financial security and healthy aging.”
Essential design features include: sustainable social security benefits, universal access to retirement savings arrangements, automatic savings and other applications of behavioral economics, guaranteed lifetime income solutions, financial education and literacy, lifelong learning, longer working lives and flexible retirement, accessible and affordable healthcare, a positive view of aging, and an age-friendly world in which people of all ages can thrive.
Governments must continue to take center stage in orchestrating their countries’ retirement systems, including the provision of retirement income and healthcare. Employers must continue to help their employees save and prepare for retirement, while individuals must take on a more proactive role in “owning” their retirement security. New social partners such as academics, think tanks, industry, charities and non-governmental organizations should be included in public-private collaborations to share their expertise and help implement solutions.
“The new social contract must be flexible and adaptable for our ever-changing times. It must honor the principles of sustainability and solidarity, while providing adequate safety nets that enable people to age with dignity and avoid poverty in old age,” said Collinson.