The New Social Contract: A Blueprint for Retirement in the 21st Century
The idea of a ‘social contract’ has been central to retirement systems in many countries around the world. A social contract is an arrangement involving three pillars (commonly referred to as a 'three-legged stool' in the U.S.) including governments, employers, and individuals – each with a specific set of expectations and responsibilities. In the last century, when these social contracts were created, they emphasized government and employer retirement-related benefits and, to a lesser extent, the need for personal savings. When these retirement systems were created, life expectancies were typically 65 years for most workers, which also happened to be the age of entitlement. Since then, the age of entitlement has remained largely unchanged, but life expectancies have increased significantly in most countries.
Today, due to increases in longevity and population aging, government-sponsored retirement benefits are under severe financial strain. Traditional defined benefit pension plans offered by employers are disappearing and being replaced by employee-funded defined contribution retirement plans. With these shifts, individuals are expected to take on increasing risk and responsibility for self-funding a greater portion of their retirement. However, many are inadequately equipped to successfully to do so, and many are therefore at risk of not achieving a financially secure retirement.
The New Social Contract: a blueprint for retirement in the 21st century, a collaboration among nonprofits Transamerica Center for Retirement Studies (US) and Instituto de Longevidade MAG (Brazil), and Aegon (the Netherlands). It examines retirement insecurities at a time in history in which megatrends are changing how people live, work, age, and retire.
The research report offers a detailed depiction of retirement-related attitudes and preparations among today’s workers, identifying areas of strength and highlighting vulnerabilities, in the context of this era in which continued change is a certainty. Ultimately, the report sets forth a series of recommendations for forging a new social contract that is sustainable, resilient, and adaptable for the future.
The findings in this report are based on a 2018 survey of 14,400 workers and 1,600 retired people across 15 countries: Australia, Brazil, Canada, China, France, Germany, Hungary, India, Japan, the Netherlands, Poland, Spain, Turkey, the UK, and the US.