Spain Country Report - Transamerica Center for Retirement ... · 4 | The Aegon Retirement Readiness Survey 2016 Key Findings Spain ranks second from last in the 2016 Aegon Retirement

The Aegon Retirement Readiness Survey 2016

A Retirement Wake-Up Call

Spain Country Report

2 | The Aegon Retirement Readiness Survey 2016

ContentsIntroduction 3

Key Findings 4

The 2016 Survey:

Part 1 The state of retirement readiness: 2012 to 2016 5

Part 2 Retirement readiness is a shared responsibility – and it requires a shared solution 8

Part 3 Habitual saving is critical for success 9

Part 4 Making it easy and more convenient to save 11

Part 5 The imperative for retirement literacy and planning 14

Part 6 It’s personal: Making the case for the new flexible retirement 16

Part 7 The promise of active living and healthy aging 17

Recommendations 18

The Aegon Retirement Readiness Survey 2016 | 3

Introduction In its fifth year, the Aegon Retirement Readiness Survey explores how increasing life expectancy is having an impact on the ways in which individuals plan for retirement.

Countries around the world are facing unprecedented change, creating both challenges and opportunities. The concept of retirement is evolving; life expectancy continues to increase; pressures on governments and pension systems are intensifying; greater responsibility is shifting to the individual.

People are having difficulty keeping up with this rapid pace of change. Too few are adequately saving and planning for retirement. Most need greater access to financial advice and planning tools in order to navigate the future and improve their retirement outlook. Moreover, people’s expectations of how they will transition to retirement may be unrealistic unless employment practices change.

This report evaluates the current state of retirement readiness and delineates key areas warranting focus and attention, including the need for: sharing the responsibility for retirement preparation, inspiring a world of habitual savers, making retirement plans more inclusive by design, facilitating the new flexible retirement, and, promoting active living and healthy aging in retirement.

The conclusion is that Spaniards need a retirement wake-up call. Solving the retirement challenge must be recognized as a shared responsibility. It requires engaging all stakeholders – governments, pensions industry, employers, and individuals – to actively take responsibility, and create a dialogue for an inclusive retirement, and implement solutions so that everyone has the opportunity to achieve long-term financial security.

Very little progress has been made since 2012 in retirement saving behavior among Spanish workers, and they are still lagging behind other countries when it comes to retirement preparedness. More needs to be done if people are going to enjoy a comfortable, secure life in retirement.


Key Findings ■ Spain ranks second from last in the 2016 Aegon

Retirement Readiness Index (ARRI). With a score of 5.0 out of 10, Spain has a low level of retirement readiness, well below the global average of 5.8. Only Japan has a lower level of retirement readiness and Spain has made no headway over the past 5 years.

■ Spanish attitudes contributing to retirement readiness have largely remained stable. Over half of Spanish workers (57 percent) feel personally responsible for ensuring that they will have sufficient income in retirement and almost half (46 percent) are aware of the need to plan financially for retirement. However although level of awareness has improved from 44 percent in 2012, level of personal responsibility has actually fallen from 64 percent.

■ Spanish behaviors driving retirement readiness remain stable. Almost a third (32 percent) of Spanish workers feel that their personal retirement planning is well developed which has improved slightly from 29 percent in 2012. A quarter of workers (25 percent) say they are saving enough for retirement which has decreased slightly from 26 percent in 2012. Thirty-six percent of workers think that they will achieve 75 percent or more of their needed income in retirement compared to 37 percent in 2012.

■ Spaniards are in strong agreement that the government should be responsible for funding people’s retirement. Eighty-one percent agree that the government should provide for people through social security. Agreement that individuals should be responsible is much weaker, only half (51 percent) agree that individuals should save for themselves through private pensions or other investments. Seven-in-ten (70 percent) agree that employers should provide through retirement plan benefits.

■ Spanish workers and retirees anticipate that their government will fund the majority of their income in retirement. Spaniards will largely depend on government funding, estimating that it will provide 64 percent of their income in retirement (well over the global average 46 percent). They expect far less of their employers compared to the global average (12 percent and 24 percent respectively) and expect less to come from their own savings and investments compared to the global average (24 percent and 30 percent respectively).

■ Just over a quarter (27 percent) of Spanish workers save habitually for retirement compared to 38 percent globally. Despite being low, the proportion of habitual savers in Spain is at least robust having increased very slightly from 26 percent in 2012.

■ Auto-enrollment is appealing to 59 percent of Spanish workers at 6 percent deferral. A majority of Spanish workers find auto-enrollment appealing at 6 percent deferral (59 percent) which is less than the global average (65 percent). It holds almost the same appeal at an 8 percent deferral rate at 55 percent, again below the global appeal (61 percent).

■ Spanish employers are not keeping up with offering of digital retirement tools to their employees. Less than 10 percent of Spanish workers report having access to digital tools such as: online retirement modelling tools, digital access to view and manage retirement savings, webcasts and seminars about saving for retirement to help them prepare for retirement or to shape and manage their retirement accounts.

■ One-in-five (20 percent) Spanish workers have a written retirement strategy and this has been increasing since 2013. Half (50 percent) of Spanish workers currently have a retirement strategy, up from 41 percent in 2013. However this is still below the global average of 58 percent. Twenty percent have a written plan, which is well above the global average of 13 percent.

■ Almost a quarter (23 percent) of Spanish workers have backup plans if they become unable to work and have to leave work earlier than planned. Spanish workers with backup plans will use their personal savings (54 percent), will rely on their spouse or partner working (26 percent), or will rely on government unemployment insurance (22 percent) if they become unable to work.

■ Just under half (46 percent) of Spaniards are paying into life insurance coverage. Of those who carry it, the most important considerations are the level of coverage (40 percent), and equally, cost or premiums and clear and easy to understand products at 31 percent. Spaniards who don’t have life insurance say either they can’t afford it (32 percent) or that they simply never thought about it (28 percent).


■ Spaniards started making contributions to the statutory pension system at an average age of 22. On average, Spaniards were three years into their working career when they started making contributions to the statutory pension system.

■ Almost two-in-five (39 percent) of Spanish workers say that they will continue working to some extent into retirement which is some way below the global average (57 percent). Spaniards who say that they will continue working into their retirement years largely say they will do so for positive reasons, for example, to keep active or to keep their brain alert (47 percent), or because they enjoy their work or career (28 percent). Others however are anxious about funding their retirement. Thirty-four percent say they will continue working due to general anxieties about their retirement income and whether their savings will last, and 37 percent are concerned that Social Security benefits will be less than expected.

Part 1: The state of retirement readiness: 2012 to 2016The Aegon Retirement Readiness Survey is now in its fifth year. A cornerstone of the research is the Aegon Retirement Readiness Index (ARRI) which was created in 2012 to assess the relative levels of retirement preparedness across workers in all countries included in our survey. Individuals are grouped according to whether they achieve a high index score (eight or above out of 10), a medium score (between six and 7.99) or a low score (below six). With a score of 5.0 this year, Spain ranks second lowest in retirement preparedness out of the 15 countries in the survey, reflecting poorly on the way in which the Spanish approach planning for their retirement.

Chart 1 Spain ranks second lowest in the 2016 Aegon Retirement Readiness Index

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5.8 4.7 5.0 5.0 5.3 5.3 5.4 5.6 7.36.76.76.16.16.05.95.8

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Chart 3 What factors shape the ARRI findings?

Aegon Retirement Readiness Index ComponentsThe ARRI is based on responses to six survey questions, three broadly attitudinal and three broadly behavioral in nature. The Spanish respond much more positively to the attitudes contributing to the ARRI (“personal responsibility” 57 percent, “level of awareness” 46 percent, “financial understanding” 48 percent) than they do to the behaviors contributing to the ARRI (“retirement planning” 32 percent, “financial preparedness” 25 percent, “income replacement” 36 percent). Aside from “personal responsibility” (which has fallen from 64 percent in 2012 to 57 percent in 2016), there has been very little change in response to the component questions feeding into the Spanish ARRI with scores changing by no more than 3 percentage points since 2012.

6

25

34

Personal responsibilityTo what extent do you feel personally responsible

for making sure that you will have sufficient

income in retirement?

Income replacementDo you think you will achieve the level of income you

think you will need in retirement?

Financial understandingHow able are you to understand financial matters

when it comes to planning for your retirement?

Retirement planningThinking about your own personal retirement planning

process, how well developed would you say that your

personal retirement plans currently are?

Level of awarenessHow would you rate your level of awareness

on the need to plan financially for your

retirement?

Financial preparednessThinking about how much you are putting

aside to fund your retirement, are you saving

enough?

1

Spain has participated annually in the Aegon Retirement Readiness Survey for five years. In that time Spain’s ARRI score has not made any appreciable improvement, dipping from 5.0 in 2012 to 4.4 in 2013, but has pulled back up to 5 and above for the past three years.

Chart 2 5-Year Trend: Spain’s Aegon Retirement Readiness Index

5.04.45.0 5.1 5.0

20162015201420132012


Chart 4 Spain: 5-Year trend: ARRI components The six index questions are answered on a five-point scale. Bars show the proportion of “top two option” (4 and 5) responses between 2012 and 2016.

For the first five questions from top to bottom, workers were asked to rate their level of agreement with a statement, e.g., “To what extent do you feel per-

sonally responsible for making sure that you have sufficient income in retirement?” From code 1 “I don’t feel responsible at all” through to code 5 “I feel very

responsible.” Bars represent top-two options (4 and 5), for example, that workers feel “somewhat or very responsible.”

For the sixth question, “income replacement,” workers were asked what proportion of their current income they expect to need in retirement, followed by

“Do you think you will achieve this income?” This is answered on a scale from code 1 “I don’t know if I am on course to achieve my retirement income” through

to code 5 “Yes I am on course to achieve my retirement income.” The bars represent top-two options (4 and 5), that they are on course to achieve at least

75% of their needed retirement income.

2012

2013

2014

2015

2016

2012

2013

2014

2015

2016

2012

2013

2014

2015

2016

2012

2013

2014

2015

2016

2012

2013

2014

2015

2016

2012

2013

2014

2015

2016 57%

60%

54%

64%

46%

46%

50%

48%

55%

53%

51%

32%

34%

32%

18%

29%

33%

29%

37%

25%

26%

25%

16%

26%

36%

38%

40%

46%

33%

44%

Personalresponsibility

1

2

3

4

5

6

Level ofawareness

Financialunderstanding

Retirementplanning

Financialpreparedness

Incomereplacement


Chart 5 Spanish attitudes on how to fund retirement

Part 2 - Retirement readiness is a shared responsibility – and it requires a shared solutionWith increased longevity, retirement is lasting longer and people are enjoying more time after their working life. Funding this longer retirement rests on three pillars – firstly, governments must provide appropriate vehicles to invest in and guidance on how to do so, secondly, employers must engage with employees on planning their retirement as well as contributing their part financially. Finally individuals must take personal responsibility and put aside and invest a sufficient proportion of their salary. And start doing so in time.

The majority (81 percent) of Spaniards agree that their government should bear the brunt of the expense for retirement by providing for them through social security, slightly greater than the average globally (75 percent). Spaniards are less eager to accept personal responsibility for funding retirement themselves (51 percent), well below the global average (62 percent). Two–thirds (66 percent) of Spaniards agree on a balanced approach where the government, employer and worker each play an equal role.

Of the 15 countries surveyed, Spaniards expect the most of their government, estimating that the government (through social security and other government benefits) will provide 64 percent of their income in retirement (well over the global average 46 percent). They expect far less to come from their employers or previous employers compared to the global average (12 percent and 24 percent respectively) and they expect less to come from their own savings and investments compared to the global average (24 percent and 30 percent respectively).

However there is evidence that the high expectations Spaniards place on their government are set to soften. Younger Spaniards (age 20-29 and 30-39) expect less to come from the government (45 percent and 58 percent respectively), expecting more to come from their employers (24 percent and 15 percent respectively) and also more to come from their own savings and investments (31 percent and 27 percent respectively).

Individuals should save for themselves throughprivate pensions / other investments

Employers should provide through retirement plan benefits

The government should provide for people through Social Security

It should be a balanced approach in which individuals,employers and the government all play an equal role

Governments should encourage employers to automaticallyenroll all their employees into a retirement plan

% that somewhat or strongly agree

81%

72%

70%

66%

51%


Chart 6 Expected proportion of retirement income by three broad sources

Total

46%

30%

24%

Spain

64%

24%

12%

Your own savings &investments, including IRAs

Your employer / previous employers (through workplace retirement plans)

The government (through social security& other government benefits)

Chart 7 Approach to saving for retirement

Part 3 – Habitual saving is critical for successThe importance of habitual saving cannot be stressed enough. People who save habitually are in a better position to plan for their retirement, feel more responsible, and have a better understanding of what retirement will mean for them financially. It is discouraging to find that the proportion of Spanish workers who save habitually for retirement is only just over one quarter (27 percent), which is significantly lower than the global average (38 percent) and the proportion of past savers in Spain is higher than the global average.

Spain

Global

HABITUAL SAVERS - I always make sure that I am saving enough for retirement

OCCASIONAL SAVERS - I only save for retirement occassionally from time to time

PAST SAVERS - I am not saving for retirement now, although I have in the past

ASPIRING SAVERS - I am not saving for retirement though I do intend to

NON SAVERS - I have never saved for retirement and I don’t intend to

38%21% 12% 23%

27%24%18%23%8%

6%


Chart 8 Spain’s habitual savers: 5-Year trend

The two key triggers that prompt Spanish savers to initiate saving for their retirement are lifestage prompts (44 percent) and employment-related prompts (26 percent). Turning a certain age (29 percent) and starting a family (15 percent) are key lifestage prompts to make workers start saving for their retirement while an employer starting to pay into a retirement plan (10 percent) and starting a first job (7 percent) are key employment-related prompts to workers starting to save for their retirement.

There are three key factors that would motivate Spaniards to save for retirement: A pay raise (43 percent) would have the most impact, a more certain economic environment (34 percent) and more generous tax breaks (24 percent) for their long-term investments follow. Few Spaniards think having access to professional advice (12 percent) or financial education (14 percent) would motive their saving.

The pattern of habitual savings has not changed since 2012, with the exception of 2013 when the level dipped down by 7 percentage points, only to rebound in 2014 to the same level as 2012, and remain there through to 2016.

Chart 9 What prompted retirement saving among savers and intenders

27%19%26% 28% 27%

20162015201420132012

I started a new (not first) job

I started my first job

Automatically enrolled into employer's retirement plan/ pension

Employer started paying into a retirement / pension plan for me

Employer o�ered matching contribution retirement plans

NET: Employment-related reasons 26%

10%

7%

6%

5%

4%

I got married

I started a family

I turned a certain age

I got separated / divorced

NET: Life stage reasons 44%

29%

15%

7%

3%


Chart 10 The appeal of auto-enrollment

Part 4 – Making it easy and more convenient to saveWorkplace retirement plans can provide the impetus needed to start people saving for their retirement. Automatic enrollment into a workplace retirement plan, whereby workers are automatically enrolled and a set proportion of their salary is invested into a retirement plan, has wide appeal globally and offers a perfect opportunity for those who are unable to save or prepare for their retirement. It is retirement saving made simple- the money is taken out of their pay check before the opportunity to spend if for other purchases arises. They won’t notice the deduction as much as if they have to do they had to handle that transaction themselves or keep track of their portfolio on their own.

Although three-in-five (59 percent) Spaniards find auto-enrollment appealing at a six percent contribution rate and 55 percent find the idea appealing at an eight percent contribution rate, this is some way below the global averages (65 percent and 61 percent respectively). In fact of all the countries surveyed; the Spanish are among the most resistant to auto-enrollment with 19 percent finding it unappealing at a 6 percent contribution rate (compared to 11 percent globally) and 21 percent finding it unappealing at an 8 percent contribution rate (compared to 13 percent globally).

The most vulnerable Spaniards, those who are most susceptible to not having the opportunity to achieve proper retirement readiness, would particularly benefit from this more structured approach in their workplace retirement plans. Unfortunately for these groups, there are often more immediate concerns such as caring for family members and paying the bills which often takes precedence over more distant priorities such as retirement planning. Women, for example, are more likely to take on family responsibilities and consequently may only have the opportunity to work on a part-time basis, earning a significantly lower salary than working full time. With less money, this may account for the a lower level of appeal among women for auto-enrollment- 54 percent at a six percent contribution level and 52 percent at an eight percent contribution level.

Spain

Global

Very or Somewhat appealingat 6% of annual salary

Very or Somewhat appealingat 8% of annual salary

55%

59%

61%

65%

The role of workplace retirement plansThe workplace is the perfect vehicle for encouraging retirement savings yet only one-in-five (21 percent) of all Spanish workers feel their employers provide enough information and support to help with their retirement planning. Spanish employers fall seriously short in providing services to help their workers prepare for their retirement. Half (49 percent) of Spanish workers say they receive no services for retirement planning from their employers. Only twelve percent say they receive educational material, one-in-ten or less say they receive an annual retirement plan income forecast (10 percent) or an annual retirement plan statement (9 percent), suggesting that improving the flow and the quality of information on retirement planning on the part of employers would be an important first step forward in encouraging workers to save.


Easy access to clear and concise information is a key component to staying engaged with one’s savings and investments- particularly those that are intended to be used in retirement which is decades away for most savers.

Moving to a digital platform is the most logical and convenient step for both employers and employees to manage retirement savings, but it is bewildering that in 2016 incredibly few Spanish workers conveyed that their employers offer them digital services. Only 9 percent of working Spaniards enjoy access to online retirement modelling tools, while very few (6 percent) have digital access to view and manage retirement savings or have access to webcast meetings or seminars about saving for retirement. Only 5 percent have access to company sponsored blogs or online network groups. Yet when workers are offered digital services, a majority find them to be extremely or very helpful.

Most Spanish workers receive fundamental workplace benefits from their employers – vacation or paid time off and a basic salary. Three-in-five have a convenient workplace location (62 percent), 56 percent receive overtime or bonus pay. Only two-in-five receive medical health insurance (42 percent). There is little evidence of a strong support system from employers that would motivate workers to plan for retirement. Less than a quarter of Spanish workers are offered a phased retirement or other employer programs providing for a transition into retirement (23 percent), even fewer are offered a retirement plan with employer contributions or a retirement plan without employer contributions (19 percent, respectively).

Chart 11 Few workers are offered digital tools to help them prepare for retirement

Company-sponsored blogsand/or online networkgroups

Webcast meetings/seminarsabout pensions/saving forretirement

Retirement planning needs digital

Percentage ofworkers o�ered

this service

Percentage who find theservice very / extremely helpful

(among those o�ered)

6% 60%

5% (low base size)

Very few workers are o�ered digital toolsto help them prepare for retirement

Retirement

6% 70%Digital access to view /manage retirement savings

9% 73%Online retirementmodeling tools


Chart 12 Workplace benefits offered by Spanish employers

Percentage of workers offered this service

Vacation/ paid time off 84%

Basic salary 79%

Convenient location of workplace 62%

Overtime and bonus pay 56%

Opportunities for career progression 46%

Access to good training provision 45%

Flexible working hours 44%

Medical health insurance 42%

Ability to work past the normal retirement age 30%

Life insurance 29%

Phased retirement or other employer programs providing for a transition into retirement 23%

Retirement plan with employer contributions 19%

Retirement plan without employer contributions 19%


Chart 14 Women, the young, part time workers and those on a low personal income are all less likely to have a retirement plan, written or not written

Chart 13 Spanish workers with a retirement strategy

Part 5 – The imperative for retirement literacy and planningA written retirement strategy is not merely a set of hand written notes but often the result of a well thought out plan in which future retirees have considered what their retirement life should look like and how they can fund it.

Half (50%) of Spanish workers have a retirement “strategy” and one-in-five (20 percent) have it in writing which is a 4 percentage point increase since 2013. This exceeds the global average where only 13 percent have a plan in writing.

Young Spaniards between the ages of 20 and 39 are least likely to have written retirement strategies - just 11 percent among those age 20-29 and 13 percent among those age 30-39. But more Spaniards reaching pre-retirement age of 55+ have their plans set in writing (33 percent).

The most vulnerable groups - women, part time workers, lower income earners and people with the least education are less likely to have had the opportunity to formulate a strategy to prepare financially for retirement - written as well as not written. For example, almost two-in-five (39 percent) of low income earners have any type of retirement strategy compared with half (50 percent) of all Spanish workers.

Total Women Young (age

20-29)

Work part-time

Low income

(personal)

Low education

(less than undergrad

degree)

Aspiring savers

Non- savers

I have a written plan 20% 19% 11% 13% 13% 16% 1% 4%

I have a plan, but it is not written down

30% 22% 34% 24% 26% 31% 12% 7%

I do not have a plan 45% 52% 49% 57% 54% 46% 78% 80%

Don’t know 5% 7% 6% 6% 7% 7% 9% 9%

2016 Global2016201520142013

45%

13%

30%

20%

28%

20%

27%

19%

25%

16%

Written plan

Non written plan


Less than a quarter (23 percent) of Spanish workers say they have a backup plan that will provide an income should they become unable to continue working. In the event they are unable to continue working, over half (54 percent) will dip into their personal savings. A quarter (26 percent) will rely on their spouse or partner’s income. One-in-five will use government unemployment insurance (22 percent) or an inheritance (21 percent).

Just under half (46 percent) of Spaniards are paying into life insurance coverage. This is consistent across all age groups. Of those who carry it say the most important considerations for life insurance are the level of coverage (40 percent), and equally, cost/premiums and clear and easy to understand products at 31 percent. Spaniards who don’t have life insurance say either they can’t afford it (32 percent) or that they simply never thought about it (28 percent). Spaniards started making contributions to the statutory pension system at an average age of 22, as is common for all age groups and were already, on average, three years into their working career at the time.

Chart 15 Just under two-thirds of all Spanish workers have failed to establish a detailed backup plan

Chart 16 Their ‘backup plan’ includes…

13%

54%

26%

22%

64%

23%

Yes

No

Don’t knowGovernment

unemployment insurance

21%Inheritance

My spouse/partner working

My savings


Chart 17 Spaniards are split between immediate retirement and working into retirement

48%

13%

19%

7%

13%

I will immediately stop workingaltogether and enter full retirement

Other / Don’t know

I will keep working as I currently do.Retirement age won’t make a di�erence

to the way I work

I will change the way I work (e.g. workingpart-time or on temporary contracts) and

I will continue paid work throughoutretirement in some capacity

I will change the way I work (e.g.working part-time or on temporarycontracts) but only for a while before I eventually give up paid work altogether

Part 6 – It’s personal: Making the case for the new flexible retirementSpaniards are split in their vision for retirement. Almost half (48 percent) do not plan to carry on with their work and will immediately stop working once they hit retirement age. Others (39 percent) intend to work in some capacity. One-in-five (19 percent) will change the way they work (e.g. working part-time or on temporary contract) but only for a while before they eventually give up paid work altogether, while 7 percent will change the way they work (e.g. working part-time or on temporary contracts) but will continue to work to some capacity throughout retirement. Thirteen percent will continue to work as they currently do, retirement age won’t make any difference to the way they work.

The foremost reason for continuing to work at retirement age above all others is that they want to keep active and keep their brain alert (47 percent). Others show concern that Social Security benefits will be less than expected (37 percent), some have general anxieties about retirement income and whether their savings will last (34 percent). Some Spaniards simply enjoy their work, and see no reason to stop at retirement age (28 percent).


Chart 18 Spaniards are optimistic about good health in retirement

Part 7 – The promise of active living and healthy agingTwo-in-five Spaniards (62 percent) describe their current health as excellent or good. Maintaining good health longer opens up possibilities for Spanish retirees to stay active, engage with their families and friends, travel, pursue hobbies, all of which are retirement aspirations. With that said, nearly half of all Spaniards (48 percent) are optimistic about maintaining good health well into retirement. This also opens up the door for individuals to stay in the workforce longer, something that two-in-five Spaniards envision doing.

15%

30%34%

14%

2% 5%

Neither pessimistic nor optimistic

Somewhat optimistic

Very optimistic

Don’t know Very pessimistic

Somewhat pessimistic


The world is ready for its retirement wake-up call. The fifth annual Aegon Retirement Readiness Survey finds no improvement in Spanish retirement preparedness since 2012 and around the world, many workers expect to rely heavily on government benefits and are not saving enough to adequately fund their retirement income needs. The reality is that people are living longer than ever before, yet inadequate attention is being given to address the costs and implications associated with increased longevity. Governments, employers, and individuals must continue to expand upon actions that have proven effective while innovating new solutions for the future.

With the Spanish retirement eligible age set to increase to 67 for both men and women by 2027¹, Spaniards need to consider whether the government will be able to fund 64% of their retirement income. They will need to assume greater personal responsibility in saving either directly or through company plans. 1. Employers should be encouraged to set up employer retirement savings plans. Policymakers should work to increase incentives

to employers, remove barriers to setting up plans, and opening them to all workers. Workers should be encouraged to save on a consistent basis through payroll deduction. Incentives to participate, such as employer or government matching contributions, will help draw attention to the benefits of deferring a portion of salary into an employer-sponsored retirement plan. Incentives, however, may not by themselves be enough to change behavior. Employers should provide for workers to be automatically enrolled into a workplace plan. Automatic enrollment is an effective nudge to start workers on a consistent long term savings program.

2. Currently, very few Spanish employers are taking advantage of the digital tools that are available to help promote good retirement planning and management among their workers. This presents a missed opportunity in encouraging workers to save for retirement. If given easy and quick digital access to planning and management tools to enhance the retirement experience, workers would be more apt to become involved, take charge of their retirement planning, resulting in a better retirement planning journey.

3. Employers and workers should agree on triggers for automatic increased savings by payroll deduction (auto-escalation). Depending on when a worker started saving consistently and how long they have before retirement, the automatic enrollment default rate may not be adequate to provide sufficient retirement income. Increases in the amount people save can be made automatically at predetermined times, such as pay raises, or upon reaching a certain age.

4. Employers and governments should continue to promote financial literacy and raise awareness, not only of the need to save for retirement, but also how to invest long term savings, and the benefits of working longer.

5. Governments should consider engaging family and friends in their campaigns to help increase awareness of the benefits of establishing a retirement savings strategy, especially for those not covered by an employer-sponsored retirement plan. No age is too young or old to start. Parents can instill good savings habits in their children by teaching them how to budget and invest.

6. Parents and adult children can begin to discuss topics that are typically sensitive, such as getting one’s legal affairs in order, inheritance, caregiving, and other financial matters.

7. Individuals should create a retirement strategy to fund retirement and manage their retirement savings to last a lifetime. A retirement strategy should be tailored to the individual’s plans for retirement (e.g. travel, continued working, etc.), other possible sources of income in retirement, and the individual’s health. Individuals should take advantage of any professional financial advice or other tools in modeling their retirement. Online tools and robo advice can help individuals assess the amount they will need to save and how to invest their savings.

Recommendations

¹ OCED – Pensions at a Glance 2015


8. The retirement plan or strategy should help people to manage retirement savings to last a lifetime. Building up adequate retirement savings is one half of the solution. Individuals should also plan to manage their retirement savings during the decumulation phase to provide them an income for life that includes possible pension income and government benefits. Lifetime income can be achieved through a guaranteed lifetime income product (annuity) or through a combination of other solutions and/or products, without any guarantees.

9. Individual retirement strategies should also include a backup plan to enable the individuals to pay for unexpected expenses and events. A wide range of insurance products including life, income or critical illness policies, for example, can provide a cost-effective way of helping individuals and their families in the event employment ends prior to expected retirement date because of an illness, disability or death.

10. Governments and employers should encourage individuals to work longer or, at a minimum, facilitate their working past normal retirement age. As many individuals and employers tie retirement age to the date of receipt of government retirement benefits, any increase in the age of entitlement (when people can draw on their social security pension) would likely influence a change in behavior and encourage individuals to work longer.

11. Employers can also facilitate workers remaining in the workforce past their normal retirement date by developing age-friendly workplaces and by implementing phased and flexible retirement options (e.g., flexible work arrangements, reducing hours, working in a different capacity). Employers are encouraged to consider the benefits of retaining older workers in the workforce, such as the experience they bring, their loyalty and understanding of the business. Employers and governments should facilitate continued training to enable individuals to maintain skills to perform their job. Individuals should take advantage of training and phased retirement programs and consider the benefits of remaining in the workplace (e.g., maintaining an active mind and body, fulfillment, community, increased income).

12. Finally, as individuals consider their preparedness for retirement, actions to keep healthy and active can increase their confidence in their retirement security and their ability to work longer. Employers should be encouraged to promote greater vitality through wellness programs in the workplace and governments and employers should consider incentives for healthy and active lifestyles.

Contact informationHeadquarters Aegon N.V.Strategy & SustainabilityMike MansfieldManager Retirement StudiesTelephone: +31 70 344 82 64Email: [email protected]/thecenter

Media relationsTelephone: +31 70 344 83 44Email: [email protected]

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Documents

Spain Country Report - Transamerica Center for Retirement ... · 4 | The Aegon Retirement Readiness Survey 2016 Key Findings Spain ranks second from last in the 2016 Aegon Retirement