A recent survey from the American Academy of Actuaries, the U.K’s Institute and Faculty of Actuaries, and the Actuaries Institute of Australia found workers in the three countries have similar reasons for lamenting the shift from defined benefit (DB) pensions to defined contribution (DC) plans.
The report, which surveyed working-age respondents, ages 18 through 64, suggests a major factor contributing to this reaction is the growing demand on workers to individually manage the risks regarding their retirement. The step away from DB pension plans now requires these individuals to take greater responsibility in order to be financially secure in their retirement years.
Academy Senior Pension Fellow Ted Goldman says that, while many workers begin the process of planning for retirement, most have trouble following through due to uncertainties about what that entails—this then turns to procrastination and inertia, as the survey notes. Questions that respondents have include how much savings is needed for retirement, how do you afford a longer life than planned, and how do you handle unforeseen costs for health conditions in later years? Additionally, women revealed they are less prepared than men in all three countries.
To combat these uncertainties, the survey encourages education teaching financial literacy and retirement planning based on age, gender and income—for all three countries; development of projection tools for education; a wider use of default features in private retirement plans such as implemented default and automatic enrollment in the earliest stages of people’s careers; and supportable and dependable public pension and insurance systems.
As to educational needs, the survey reports that, respondents, on average, said they are best prepared in “taking action to save, acquiring information, and in planning to return to work if retirement assets drop in value.”
“Understanding and managing complex retirement risks presents a societal challenge, not just a personal one,” says Goldman. “As a society, we need to be open to new retirement policy approaches and public education initiatives to help people evaluate and address the risks and achieve financial security in retirement.”
More information on the survey can be found here.