Sent: 12-05-2009 14:09:02
In this issue:
Return to full article list
HomeFree weekly newsletterSelf Managed Super Fund ArticlesContact usLogin
The Silver Lining of the Economic Downturn - Part 2
Last time I started to outline the proceedings from the recent AARP Reinventing Retirement conference. I explained that the current economic conditions are forcing countries to rethink outdated retirement systems at long last. As I said last time, while countries must come to their own solutions reflecting their culture, demographics and stage of development, a number of common themes will invariably apply.
The conference noted that financial literacy and automatic pension features are becoming increasingly important as the responsibility for retirement planning shifts toward the individual with the growth of DC retirement savings schemes around the world. Not surprisingly, numerous studies show that most working adults are unaware of the opportunities and risks involved in investing and saving for their later years. Efforts like Singapore's national MoneySENSE program, which emphasizes life-long financial education through interactive tools, can empower individuals.
This next bit really pleases me as it was something I illustrated through my Doctoral research. Financial education is not the panacea many think it is.
It needs to be combined with other measures to ensure adequate incomes in retirement. Examples include adequate disclosures, restrictions on pension withdrawals, and automatic mechanisms in defined-contribution plans.
To that I would add context. Financial education without context is little more than a waste of time.
The conference argued that extending working lives will play an important role in strengthening older adults' income security (no argument there). Providing opportunities for prolonged working lives can alleviate labor shortages, help stabilize finances of social insurance systems, and bolster personal retirement savings (finally some sense from policy makers). As they noted, in some countries, the solution may be to raise formal retirement or pension-eligibility ages whilst for others, it may be a matter of creating better economic incentives for both individuals and employers to save.
Singapore has come up with a novel approach. It has a formal retirement age of 62, but employers are now required to offer re-employment for an additional three years. The country also recently introduced an earned-income credit that is weighted in favor of older workers. Can you imagine such things happening in Australia? Having said that I somehow doubt the French would go for it given their past record on taking action to demand retirement benefits from system that is fast sinking under debt and unfunded liabilities.
It was argued that human resources strategies like flexible work arrangements, career development and health promotion can help workers remain productive longer. AARP gave the example of Singapore Health Services that employs a "Silver Connection Consultant" who offers guidance on career transitions and management of older workers. They also recommended that life-long learning and training are essential as work lives are extended. Unfortunately, older workers have fewer opportunities for continuing education because of overt and subtle discrimination (something I believe I have encountered in the US. Can't prove it as it is of course illegal, but....). The UK has explored portable life-long-learning schemes that are jointly funded by government, employers and employees. In the UK older adults are turning increasingly to community colleges because of their affordability and flexible schedules.
Further, they suggested that workplace design can help create productive and comfortable work environments for older adults. As they pointed out, some companies are investing in automation to alleviate job-related physical demands. There is also research to suggest that the right lighting, acoustics, ergonomics and individualized work spaces can all help maximize older workers' productivity. Sounds like a little too much like common sense so it probably won't get taken up...
Not surprisingly it was noted that ageist attitudes are a barrier to continued work and engagement, and all stakeholders must confront them. As they said, governments and businesses can pass policies barring age discrimination and be proactive in ensuring training opportunities are evenly distributed. They can also join NGOs in public relations campaigns that show realistic and more positive images of older adults. However, ageism is often very difficult to prove. The media has a responsibility, as well, not to further negative stereotypes.
However, and this is where pragmatism enters the picture, policies aimed at helping older adults must be viewed through a broader lens. As was noted, in countries with high unemployment, extending the retirement age could heighten intergenerational tensions. Spain is a case in point where they now have an official unemployment rate of 17% (hate to think what the real rate is). Consequently finding the right balance is likely to need difficult trade-offs and I am sure mistakes will be made along the way. However, as AARP point out, opportunities exist for intergenerational cooperation in childcare, education, environmental protection, and community organization.
As AARP noted, Asia is at the forefront of a worldwide demographic transition. The extent to which countries can tap into older adults' potential as they age demographically will have a dramatic impact on their economic competitiveness and on the life-long quality of life of their individual citizens. Can't argue with that.
This email is general in nature only and does not constitute or convey specific or professional advice. Legislation changes may occur quickly. Formal advice should be sought before acting in any of the areas discussed. Be aware that the information in these articles may become innaccurate with time. Responsibility is disclaimed for any inaccuracies, errors or omissions. Particular investments are neither invited nor recommended and hence this publication is not "financial product advice" as defined in Section 766B of the above legislation. All expressions of opinion by contributors are published on the basis that they are not to be regarded as expressing the official opinion of any other person or entity unless expressly stated. No responsibility for the accuracy of the opinions or information contained in the contributor's articles is accepted by any other person or entity. Copyright: This publication is copyright. If you wish to reproduce this article you require a license, which can be purchased here, to do so.