Groups Offer Blueprint for New Social Contract for Retirement

The blueprint calls for nine design features of the new contract.

Nearly half of today’s workers and retirees fear that future generations of retirees will be worse off than those currently in retirement, cited by 49% globally and 46% in the U.S, according to “The New Social Contract: A Blueprint for Retirement in the 21st Century.” The report is based on a survey of 16,000 workers and retirees in 15 countries through a collaboration between Aegon Center for Longevity and Retirement, the Transamerica Center for Retirement Studies and Instituto de Longevidada Mongeral Aegon.

Asked what trends are affecting their plans for retirement, respondents said:

• Reductions in government benefits (38% global, 26% U.S.)
• Increased life expectancy (27% global, 25% U.S.)
• Market volatility (24% global, 22% U.S.)
• Changes in labor markets (21% global, 14% U.S.)
• Prolonged low interest rate environment (20% global, 14% U.S.)

“Megatrends are disrupting long-standing societal constructs, including how people live and work, plan for their future and, ultimately, prepare for their retirement,” says Catherine Collinson, CEO and president of the Transamerica Center for Retirement Studies. “People are living longer than at any time in history, and birthrates are declining. This phenomenon, known as ‘population aging,’ is financially straining government-sponsored benefits. Simultaneously, employers have been replacing traditional defined benefit [DB] pension plans with employee-funded defined contribution [DC] retirement plans. Today, individuals are expected to take on increasing risk and responsibility in self-funding a greater portion of their retirement income.”

Only 7% of those around the world and 4% in the U.S. think the government should do nothing to address the cost of Social Security. Only 43% of workers around the world and 57% in the U.S. are offered a retirement plan that includes an employer contribution. Only 39% of people around the world and 55% in the U.S. say they are habitual savers who are always making sure they save for retirement. A mere 25% of people around the world and 32% of Americans think they are on course to meet their retirement needs.

Collinson says, “[A] new social contract is needed for retirement.” This should include sustainable Social Security benefits, universal access to retirement saving, automatic savings and other applications of behavioral economics, guaranteed lifetime income solutions, financial education and literacy, longer working lives and flexible retirement, accessible and affordable health care, a positive view of aging, and an age-friendly world in which people of all ages can thrive, she says.