The Spanish and the Japanese, the two populations with the highest life expectancy, are the least prepared for retirement. Two thirds of Spanish people believe that future generations will have worse pensions, with almost half saying the State should increase taxes to address the issue.
Key points
• Spanish people match the Japanese in living longer, and being the least 'retirement ready'
• Only 27% of Spanish people save habitually and 9% don't save at all
• Two thirds believe future generations will have worse pensions
• 47% say the State should increase taxes to address the anticipated pension shortfall
• Aegon calls for a new social contract for retirement, both in Spain and globally
These were the main messages as the pension debate was covered by 20 print and online news sources in Spain recently. The widespread media coverage of the Spanish retirement and pension paradox included reports in El Economista, La Vanguardia, El Confidencial and EuropaPress, the most influential economic newspapers in the Spanish market.
While Spanish retirement was a hot topic, there was a single source for the information – the publication of Aegon's 2018 retirement research into the market.
So, why the glum headlines in some of the Spanish publications? The key reason is Spain's performance in the Aegon Retirement Readiness Index (ARRI) which measures how prepared workers around the world feel for their retirement across the 15 countries surveyed. Spain and Japan, the two countries with the highest life expectancy worldwide, score 5.1 and 4.7, respectively. This consigns Spain to 14th place in the ranking, just ahead of Japan.
India, China, Brazil and the United States, according to the Index, save the most and are best prepared to fund retirement. Germany, with an ARRI of 6.1, and the United Kingdom, with a 6, are the European states that best plan their retirement financially.
The launch of 2018 Spanish country report follows on from the publication earlier this year of Aegon's global 2018 Retirement Readiness Research Survey that includes data from Spain, Japan and 13 other countries. The main theme of the global report, echoed by individual country reports, is the need to forge a new social contract that is sustainable, resilient, and adaptable to changing times.
Longevity
Spain's position in the ranking underlines the need for a new Social Contract as Aegon's research also shows that the Spanish lag behind the global average in terms of saving to fund their pensions. Compared to the global average of 39 percent, just 27 percent of Spanish people save money habitually, with a further 9 percent admitting they do not save at all. Two-thirds (67 percent) of people in Spain think that future generations of retirees will be worse off in retirement than current retirees.
At the same time Spanish people are living longer. "Spanish life expectancy is the second highest in the world and the UN estimates 42 percent of the Spanish will be 60 years old or above that by 2050. While we are certain that we are an aging society, we do not prioritize financial planning for our retirement which is set to an increasingly long part of our lives," says Aurora Martín, head of the technical pension department of Aegon.
In addition, Aegon's research shows that the Spanish expect that two-thirds (66 percent) of their retirement income to come from the government (compared to 46 percent globally). People in Spain expect little from their employers (11 percent; 24 percent globally) and less from their own savings and investments (23 percent) than globally (30 percent).
A third (34 percent) of people in Spain are confident that their own healthcare in retirement will be affordable (compared to 21 percent globally). This falls to just a quarter among Millennials (25 percent) indicating that while the Spanish healthcare system is widely considered one of the best and most inclusive worldwide, doubt is perhaps creeping in about its long-term sustainability.
Solutions
Asked what action the government should take to address the growing cost of Social Security, the most commonly held view by Spanish people (47 percent) is that the government should increase overall funding for Social Security through raising taxes without having to reduce the value of individual payments. Thirteen percent of people in Spain take an opposing view, that the government should reduce the overall cost of Social Security provision by reducing the value of individual pension payments without having to increase tax.
One-in-five (21 percent) people in Spain take the middle ground, saying that governments should take a balanced view, with some reductions in individual payments and some increases in tax.
Click here to read more about Aegon's call for a new and comprehensive social contract on retirement