Mr. Mike Mansfield, program director at the Aegon Center for Longevity and Retirement, cuses on researching people's preparedness for retirement. In the context of a falling birth rate and people living longer, The Aegon Center for Longevity and Retirement has just issued its new annual retirement readiness survey called "The New Social Contract: Empowering individuals in a transitioning world".
Could you share some of the main findings from your annual report? What are our current main challenges?
Mr. Mansfield: I think our starting point was looking at the question of "How do we prepare for older age in the 21st century?" One of the greatest opportunities and more pressing challenges is that the increases in longevity present us with an extra gift of time. This is requiring us to engage our imagination and think about our life priorities, how we're going to spend our time in retirement and in the workforce. Also to rethink what retirement is going to look like for us. Within that context, the social contracts that we have in many countries, between employers, governments and individuals, are under severe financial strain. Individuals are expected to take an increasing risk and responsibility to self-fund some of their retirement. However, that is happening in a situation where many people just do not have the skills or are not equipped to successfully do so. As a result, they are falling into the risk of maybe not having as financially secure a retirement as they should. We started the conversation about new social contracts in 2018, when we sketched out the blueprint for what retirement might look like in the 21st century. A change in this year's report was putting the individual at the center of our research, and looking at what it means for them in preparing for retirement, and empowering them with some tools and messages that might help them prepare for the future. This needs to happen within a social contract, where employers, governments and other social partners also have a role to play.
On the one side empowering individuals, on the other side also to give them the opportunity to take responsibility as well.
Mr. Mansfield: Absolutely, they go hand in hand. People are being asked to take more responsibility because of the financial strain that many systems are under. I wanted to make sure that people have the tools and the knowledge that they need to do so. Three facts came out from our report that were really eye-opening and convinced me that we need to do more to help individuals prepare for retirement. Only three in 10 workers around the world in the 15 countries we surveyed, said that they were either very or extremely confident that they will be able to retire comfortably. Just under a quarter of the people we surveyed, were extremely confident that their healthcare would be afforded before their retirement. Also, a worry is that two in five people said that they felt stressed about their long-term financial plans once a month. What we did not want to do was to stoke fear in people, because that can be overwhelming for individuals. And it can also be counterproductive for the work that we are trying to do. So we wanted to get across the message that reforms are needed in retirement systems around the world. Individuals can take steps today to start preparing for retirement and we can give people some tips and tricks to get started on taking control of their retirement preparations.
One of the greatest opportunities and more pressing challenges is that the increases in longevity present us with an extra gift of time.
Your report is focusing quite a lot on the fact that we must build our wealth while we protect our health, and the importance of prevention and healthy lifestyle.
Mr. Mansfield: Two years ago, we wrote a report in which looked at the elements for a successful retirement. It came down taking care of finances and adopting healthy behaviors, because these affect what people aspire to do when they stop working. That often involves activity like traveling and pursuing hobbies, and so forth. All that requires people to be in a state of good health to enjoy it. We found that few people's views of retirement have changed with only a third of the workers that we surveyed seeing it as a cliff-edge experience where you might stop working on a Friday and on Monday, and for the rest of your life, you are retired. The majority of people envisaged continuing to do some form of work. But for people to have any form of active retirement, they need to make sure that they have good health to be able to do so.
How is the future of retirement changing? What is currently the ideal retirement plan?
Mr. Mansfield: It is important to maintain good health. One of the findings from the report that has been consistent over the past couple of years is that when we asked people who have retired, if they retired sooner or later than they planned, 39 percent, had retired sooner. The biggest reason for this was ill-health followed by unemployment. If people retire earlier than they planned because of ill-health, they have a shortfall before they become eligible for retirement benefits and have to dip into savings. They are earning less money, making fewer contributions to their retirement plan, and not enjoying the benefits of the returns of the investments they have. It goes to show that maintaining good health is very important so that we can continue to work until we're ready to retire. Another element that we brought out this year in retirement is the importance of lifelong learning to keep their skills up-to-date. It has become even more prominent. When we wrote a report earlier in the year of how people who have physically-demanding jobs are preparing for retirement, we saw that those people are more at risk of aging out of their jobs or having their jobs impacted by technology, robotics or other changes in the workplace.
This is also very important in research being executed by universities into the longevity economy, the changing social contract, and preparing for a longer life. Training and expanding our cognitive abilities as part of lifelong learning is an important part of helping us to enjoy life and our health longer. It is very much interconnected.
Mr. Mansfield: I think it is very interconnected. You read many articles in the newspapers about the importance of keeping your brain alert as we age, challenging ourselves to do different things. People's retirement aspirations, such as traveling and doing voluntary work keep them active. Travel keeps you active mentally and physically. You go to a new city, whether on Google Maps, your phone, or a more traditional way, you have got to puzzle out how to get around and do different things. The idea of staying mentally alert is very important, or doing the things that you want to do, but in the workplace, it is changing dramatically. We need to make sure that we talk to our employers about opportunities to try and keep skills up-to-date. We can gain control by taking an online course or doing other things to keep ourselves as employable as possible, for as long as possible.
Only three in 10 workers around the world in the 15 countries we surveyed, said that they were either very or extremely confident that they will be able to retire comfortably.
According to your report, which countries and parts of the world are best prepared for the new social contract?
Mr. Mansfield: We researched 15 countries around the world, covering Europe, the Americas, Asia, and Australia. We have been doing research for eight years now and have seen a remarkable similarity in how countries prepare, and feel they are prepared for retirement over the course of time. Countries that score highest in our Aegon Retirement Readiness Index have remained the same group of four or five countries over time. Those that do less well have also stayed very similar. The countries that do well are India, the United States of America, Brazil, and the UK. I think the reason is twofold. Some of the developing countries or emerging markets, like India, Brazil, and China have enjoyed strong economic growth for many years now. The outlook is still positive in terms of how growth may continue in those countries. For that reason, I think people's expectations are more positive than in some other countries. The other factor is that countries like the United Kingdom and the United States, score more highly on the Retirement Readiness Index because there is a more defined contribution type retirement program where individuals are more involved in decisions they make about how they invest their retirement funds. As a result, they feel more engaged in the process than countries in continental Europe that maybe have a more traditional defined benefit-type landscape, where the expectation is that the government play a larger role in providing a great portion of their retirement income.
How can we best prepare for our future healthy and happy longevity?
Mr. Mansfield: Maintaining a healthy lifestyle is very important. Another would be embracing lifelong learning. In the healthy lifestyle report what we have seen over time, is when we asked people about healthy behaviors, such as exercising on a regular basis, avoiding harmful behaviors, or eating a healthy diet, the more healthy behaviors people engaged in, the higher they scored in our Retirement Readiness Index. It shows that the mindset of taking care of yourself by looking after your health, making sure that you keep your skills up-to-date, has a knock-on effect in how you lead your life and your outlook in preparing for retirement. We stress in our reports the combination of sound financial planning, writing down that plan for retirement, having a backup plan in case something goes wrong, saving habitually, maintaining a healthy lifestyle, and keeping lifelong learning up-to-date.
Could you recommend any books that have inspired you recently with regards to healthy longevity?
Mr. Mansfield: There is a book, and probably many people will have heard about it, called, "The 100-Year Life" written by Andrew Scott and Lynda Gratton. What I really enjoyed about it was the core message that the traditional trajectory, in which we had a three-phase life of education work, and retirement is on the way out and people need to look at their life more holistically and to do things in parallel. During our life or working life, we may take time out to reeducate ourselves or take care of a family member, or step back into the workplace and work longer. The challenge is to find a balance that allows us to do those things for a longer period of time. The message in their book resonated with a lot of the ideas we've been speaking about in our research. The book was written in a way that was very engaging and easy to read. It struck a chord and sparked an idea in my head.
Thank you so much for your time and for summarizing your report.
Download report: The New Social Contract: Empowering individuals in a transitioning world.
