Despite improving corporate financial performance in developed economies and more benign economic conditions in developing economies, large numbers of employees have become more insecure about their jobs and finances.
In fact, retirement security has become an increasingly important issue for employees around the world, according to the Towers Watson Global Benefit Attitudes Survey.
However, when it comes to retirement expectations or how long they need to work to afford a comfortable retirement, the views of employees in developing and developed economies differ greatly.
The survey of more than 22,000 employees in 12 economies, found in developing economies including Brazil, Chile, China, India and Mexico, between two-thirds and three-fourths of respondents expect economic progress to usher in continually improving standards of living in retirement.
Conversely, in developed economies (Australia, Canada, Germany, Japan, the Netherlands, the U.K. and the U.S.), only 20% to 40% of workers expect to enjoy the same or better standards of living in retirement than earlier generations.
The survey also found that in most economies, a majority of employees are confident of being able to afford 15 years of retirement. But confidence declines substantially when employees are asked to look further into the future.
In developed economies, typically two-thirds of respondents believe their financial resources will support 15 years of retirement, but less than half are confident when considering 25 years into retirement.
"Most employees globally believe they are behind schedule on saving and find it difficult to catch up because they may not have the financial means to do more in this environment," says David Speier, senior consultant at Towers Watson.
"It’s no wonder that retirement security has taken on heightened importance for employees worldwide, with the majority in all economies recognizing the need to save more, both generally and specifically for retirement.”
Changing Views on When to Retire
In most of the developed economies, one-third to nearly one-half of respondents have decided to extend their working years, often substantially.
The average increase is five years in Australia and the U.S.; four years in Canada, Japan and the U.K.; and three years in Germany and the Netherlands. As a result, the average anticipated retirement age is now over 65 in Australia, the Netherlands, the U.K. and the U.S.
On the other hand, in developing economies, most workers haven’t changed their anticipated retirement age over the past three years. And of those who changed their minds, more expect to retire sooner rather than later.
The expectation of longer careers in developed economies partly reflects longer life expectancy and governmental pension reforms that have increased the retirement age.
However, the transition from defined benefit (DB) to defined contribution (DC) retirement plans also appears to be playing a significant role.
"Developed economies with older retirement ages tend to be further along in the transition from DB to DC only,” said John Ball, senior consultant at Towers Watson.
Around the globe, between 40% and 80% of employees are worried about their current and future financial situation, with the greatest concern among employees in Chile, Mexico and Brazil.
Between 70% and 80% of respondents acknowledge the need to save more in general. Between half and three-quarters of respondents say they will need to save much more to achieve a comfortable level of income in retirement.