Wave 2 of the East Asia Retirement Survey Richard Jackson - - PowerPoint PPT Presentation

From Challenge to Opportunity

Wave 2 of the East Asia Retirement Survey

Richard Jackson President Global Aging Institute University of Indonesia

Jakarta September 2, 2015

Gap.GlobalAgingInstitute.org



The East Asia Retirement Survey is now in its second wave. The first wave was conducted in 2011 in China, Hong Kong SAR, Malaysia, Singapore, South Korea, and Taiwan. The second wave was conducted in 2014 in the six first-wave countries plus Indonesia, the Philippines, Thailand, and Vietnam.



The survey is nationally representative, except that the samples for China, Indonesia, the Philippines, Thailand, and Vietnam were limited to urban areas.



The survey universe consists of “main earners” aged 20 and over, including both current main and retired main earners.



Respondents were asked about their general attitudes toward retirement, as well as about their own retirement experience and expectations.



Current retirees were asked about their current retirement experience, while current workers were asked about their retirement expectations.

2

Survey Framework

3

The Future of Retirement in Indonesia

4

By overwhelming majorities, East Asians reject the traditional model of family-centered retirement security.

10% 6% 8% 10% 6% 11% 13% 11% 8% 10% 20% 21% 26% 29% 30% 32% 34% 48% 60% 63%

0% 10% 20% 30% 40% 50% 60% 70%

Income Personal Care

"Who, ideally, should be mostly responsible for providing income to retired people?” and "Who, ideally, should be mostly responsible for providing personal care to retired people?”

Share of Respondents Saying "Grown Children or Other Family Members"

Looking to the future, today’s workers expect to be less dependent on the family than today’s retirees are.

5

9% 16% 17% 20% 25% 27% 29% 32% 37% 40% 6% 6% 6% 14% 12% 21% 12% 14% 16% 10%

0% 5% 10% 15% 20% 25% 30% 35% 40% 45%

Today's Retirees Today's Workers

Share of Today's Retirees Who Are and Share of Today's Workers Who Expect

6

Views differ greatly across East Asia about who should replace the family as guarantor of retirement security.

61% 48% 40% 44% 34% 18% 22% 9% 10% 18% 23% 30% 36% 41% 43% 45% 62% 63% 66% 66%

0% 10% 20% 30% 40% 50% 60% 70%

Retirees Themselves Government

"Who, ideally, should be mostly responsible for providing income to retired people?”

Share of Respondents Saying “Retirees Themselves, through Their Own Savings” versus Share Saying “Government”

7

Indonesians are divided about the role of government, employers, and individuals in providing retirement income.

45% 25% 18% 11% 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50%

Government Former Employers Retirees Themselves Grown Children Share of Indonesian Respondents Saying...

"Who, ideally, should be mostly responsible for providing income to retired people?"

8

Most Indonesians are anxious about their retirement security, and with good reason.

87% 80% 79% 75% 89% 85% 82% 83% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Being in poor health and having no one to care for them Being a burden on their children Exhausting their savings Being poor and in need

• f money

Today's Retirees Today's Workers

Share of Today's Retirees and Share of Today's Workers in Indonesia Who Worry about Each of the Following Things Happening during Retirement...

9

While state pension receipt is expected to rise in most East Asian countries, in Indonesia it is expected to fall.

60% 68% 61% 44% 55% 54% 79% 65% 55% 83% 45% 49% 59% 68% 68% 86% 89% 89% 91% 95%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Today's Retirees Today's Workers

Share of Today's Retirees Receiving and Share of Today's Workers Expecting to Receive Income from the State Pension System

10

Very few Indonesians can count on asset income in retirement.

3% 11% 13% 19% 41% 42% 42% 48% 50% 51% 8% 18% 18% 60% 63% 77% 68% 60% 73% 74%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90%

Today's Retirees Today's Workers

Share of Today's Retirees Receiving Income and Share of Today's Workers Expecting to Receive Income from Financial Assets*

* Includes insurance and annuity policies and stocks, bonds, and mutual funds, but excludes bank deposits.

11

Indonesia’s early retirement ages complicate the challenge

• f ensuring retirement security.

8% 28% 20% 14% 39% 32% 49% 29% 51% 34% 33% 50% 56% 60% 60% 65% 71% 71% 75% 76%

0% 10% 20% 30% 40% 50% 60% 70% 80%

Today's Retirees Today's Workers*

Share of Today's Retirees Who Retired at Age 60 or Later and Share of Today's Workers Expecting to Retire at Age 60 or Later

* Includes workers who never intend to retire.

12

Strategic Implications

13

What Indonesians Think About Retirement Reform

32% 53% 54% 62% 81% 90% 68% 47% 46% 38% 19% 10%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Increase taxes to provide a basic pension benefit to those elderly who are in financial need Require employers to

• ffer more jobs to

the elderly Require workers to contribute more to pay for government pension programs Raise the retirement age Encourage workers to save more for retirement Require workers to save more for retirement

Should Not Should

Share of Indonesian Respondents Saying That Government Should or Should Not ...

14

Directions for Reform



Improve the adequacy of state pension systems



Encourage or require workers to save more for their own retirement



Establish more robust floors

• f old-age poverty

protection



Raise retirement ages and encourage longer work lives

55% 51% 41% 32% 32% 14% 11% 11% 9% 5%

0% 10% 20% 30% 40% 50% 60% Indonesia Vietnam Thailand Taiwan Philippines South Korea Malaysia Singapore Hong Kong China

Share of Today's Workers Who Do Not Expect to Receive a State Pension Benefit

15

There is widespread demand for translating lump-sum pension payments into retirement income streams.

38% 44% 45% 45% 52% 53% 59% 62% 69% 78% 19% 25% 7% 14% 19% 18% 11% 19% 7% 7%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90%

All in Monthly Payments All in a Lump Sum

“If you could choose how pension benefits will be paid to you, please indicate which of the following ways you would prefer to receive the benefits.”

Share of Today's Workers Saying “All in Regular Monthly Payments” versus Share Saying “All in a Single Lump Sum”

16

Directions for Reform



Improve the adequacy of state pension systems



Encourage or require workers to save more for their own retirement



Establish more robust floors

• f old-age poverty

protection



Raise retirement ages and encourage longer work lives

72% 52% 64% 77% 64% 30% 57% 54% 68% 68% 77% 82% 83% 85% 85% 88% 89% 90% 90% 90%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Contribute More Save More

Share of Respondents Saying “Require Workers to Contribute More to Pay for Government Pension Programs” versus Share Saying “Require Workers to Save More for Their Own Retirement”

17

Although Indonesians have a low level of market-orientation, they have a high level of trust in the financial services industry.

63% 59% 50% 45% 43% 42% 41% 30% 29% 16% 8% 12% 29% 30% 19% 29% 27% 38% 32% 50%

0% 10% 20% 30% 40% 50% 60% 70%

Agree Disagree

Share of Respondents Agreeing and Disagreeing That "People Can Trust Financial Services Companies to Help Them Prepare for Retirement"

Note: This question used a five-point scale, with 1 being strongly disagree and 5 being strongly agree. "Agree" = 4 + 5 and "Disagree" = 1 + 2.

18

Directions for Reform



Improve the adequacy of state pension systems



Encourage or require workers to save more for their own retirement



Establish more robust floors of old-age poverty protection



Raise retirement ages and encourage longer work lives

75% 74% 72% 69% 67% 61% 60% 43% 32% 27%

0% 10% 20% 30% 40% 50% 60% 70% 80%

South Korea China Taiwan Hong Kong Thailand Malaysia Singapore Philippines Indonesia Vietnam Share of Respondents Saying Government “Should Increase Taxes to Provide a Basic Pension Benefit to Those Elderly Who Are in Financial Need”

19

Directions for Reform



Improve the adequacy of state pension systems



Encourage or require workers to save more for their own retirement



Establish more robust floors

• f old-age poverty

protection



Raise retirement ages and encourage longer work lives

83% 68% 62% 60% 54% 53% 43% 40% 38% 23%

0% 20% 40% 60% 80% 100%

South Korea Hong Kong Indonesia Thailand Singapore Malaysia Vietnam Taiwan China Philippines Share of Respondents Saying Government Should Raise the Retirement Age

GLOBAL AGING INSTITUTE

Gap.GlobalAgingInstitute.org

20