The Crumbling Social Contract: Retirement Readiness a Global Issue

Many Americans worry that they are ill-prepared for a financially secure retirement. Catherine Collinson, CEO and president of the Transamerica Institute and executive director of the Aegon Center for Longevity and Retirement, says they aren’t alone.

Speaking at the SVIA’s 2019 Spring Seminar in Tucson, Arizona, Collinson said longer lifespans, lower birth rates and aging populations are straining retirement systems around the world, jeopardizing social safety nets. Amid this “crumbling social contract,” she said, only 25% of workers globally feel they’re on track to achieve their estimated retirement income needs.

That’s one of the key findings from the latest Aegon Retirement Readiness Index survey, which measures how well workers in 15 countries are prepared for retirement on six dimensions. The index itself scales from 1 to 10, with any score below six considered low and any score of eight or above considered high. On average the 15 countries scored 5.9, with Japan ranking lowest at 4.7. The U.S. came in fourth highest at 6.5, topped only by India (7.3), China (6.7) and Brazil (6.6).

Collinson theorizes that results for the three top-scoring countries may have been skewed because the survey was conducted online, and workers in many rural regions of those countries don’t have internet access. Respondents who are online, she said, “are more likely to be engaged in the developing economies in those countries, and their optimism is pervasive throughout all of the survey findings.” Still, she said, the survey indicates there’s much room for improvement.

Collinson said Transamerica and its parent company, Aegon, are hoping employers, policymakers and other retirement industry participants will join with them in creating a new social contract that honors the principles of sustainability and solidarity and provides safety nets for people to age with dignity. Such a contract, she said, would have to be adaptable for changing times and ideally contain these nine essential design features: 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. Under that scenario, Collinson said, working and retirement would no longer be mutually exclusive, aging would be viewed as something positive and valuable, and people of all ages could grow, thrive and share in a positive life.