Pittsburgh Post-Gazette

May 11, 2005

 

Americans ahead in pensions savings

by Pamela Gaynor Pittsburgh Post-Gazette

U.S. policymakers fret about strains on Social Security as baby boomers retire and worry that Americans have prepared too little for retirement.

But compared with workers worldwide, Americans appear to be ahead on the savings curve, a new survey shows.

Matched only by the British, American workers are twice as likely as those in other countries to contribute to private pension plans, according to the survey, billed as the largest of its kind.

The survey, released yesterday, covered 11,500 people in nine regions of the world, including the United States, Canada, Brazil, France, India, Japan, Mexico, the United Kingdom, mainland China and Hong Kong. It was sponsored by London-based HSBC Holdings plc, the world's third largest banking firm.

"Even though there's a lot of worry in the U.S. about how much people are saving ... strangely enough, compared to the rest of the world, we're leaders," said Ken Dychtwald, president of Age Wave, a San Francisco-based consulting firm that oversaw the research.

The U.S. personal savings rate, the government's most widely watched barometer of savings, dropped below 1 percent last year and has been on a two-decade decline. It stood at 10.8 percent in 1984.

The sharp decline is one reason policymakers have worried that people might count too much on Social Security for their retirements at a time when federal coffers likely will be strained by retirements of the baby boomers.

But the United States isn't alone in confronting such problems.

Governments worldwide, some of whose populations are aging faster than the United States', are concerned about how their retirement safety nets will hold up in the face of aging populations, declining birth rates and increases in life expectancy.

Those demographic pressures will "create real challenges, not the least with regard to the funding of retirement," said Sir John Bond, Group Chairman of HSBC Holdings.

The banking firm plans to use the survey results to expand its market into insurance and pension products.

But the survey also has broad implications for other businesses, particularly for the light it shed on how many people want to work past normal retirement ages and what employers will need to do to retain them, Dychtwald said.

He said more than 75 percent of those surveyed wanted to work past normal retirement, and 80 percent said they opposed mandatory retirement.

Workers from less developed countries where work is likely to involve more "physical toil" were less in favor of working into old age, but, in some countries, such as India, more likely will need to.

Even in more developed countries, however, survey respondents generally wanted the flexibility to work part time or to "cycle" in and out of the workplace -- shifting their time between work and leisure, Dychtwald said.

Given a choice of how to ease retirement funding burdens for government, 45 percent said working longer was the best solution. Far fewer (26 percent) favored higher taxes and only 15 percent favored reduced pensions.

"It's not lost on us that the average employer and work benefit is not at all in alignment with this work preference," Dychtwald said.

He said he saw employers slowly beginning to accommodate those desires but also detected "ageism" in the workplace.

"We're beginning to see more flex-time, more sabbaticals," he said.

But Dychtwald predicted some companies would have to do more as a wave of retirements threatens them with a "brain drain" or labor shortages.

He likened the impending need to accommodate older workers to adjustments some companies began making after the 1960s, when rising numbers of female workers wanted more ways to balance careers and child-rearing.

Among some of the survey's unexpected findings: Dychtwald said older people were held in highest regard in Western societies, such as Canada, the United Kingdom and the United States, and were least respected in India, China and Japan.

"That runs against the general knowledge of the last few decades," when Asians were perceived as valuing elders far more than their Western counterparts, Dychtwald said

While Asian parents by and large expect to rely on their children during retirement, younger Asians -- having been exposed to other thinking through travel and trade -- "don't want to take care of their parents," Dychtwald said.