The link between countries with disengaged investors and generous state pensions

The debate over how to provide for comfortable retirement for citizens remains high on the political agenda of most countries.

Now the findings of the Schroders Global Investor Study, which analysed the views of 20,000 investors in 28 countries, offers further insight on the balance between providing a safety net for pensioners and encouraging self-reliance.

The study asked investors, those with at least the equivalent of €10,000 invested, what proportion of their retirement income would (or currently does, for those already retired) come from a state pension. It also asked if investors were keen to improve their understanding of investment.

Low expectations, high engagement

While one may not cause the other, the two sets of data offer patterns. Globally, investors in Asia and South America were most keen to learn more about investing. They also had the lowest expectations that the state would provide for their retirement.

Europeans put most hope in a decent state pension, with the average investor expecting it to make up 27% of total retirement income compared to just 14% in Asia and 12% in the Americas.

An eagerness to learn was high around the globe but at its lowest in Europe, where 85% of investors expressed a desire to learn more about investment, compared with 90% in the Americas and 94% in Asia.

Asia wants more understanding

Observations can also be made on a country level. In Hong Kong, the expectation of government retirement income support was at its joint lowest (with South Africa).

The belief was that state pensions would make up only 5% of retirement income. Respondents in Hong Kong were also in the top half of the league table in eagerness to learn, at 94%.

The appetite to learn was highest in Indonesia – the response rate was 99% - and as with Hong Kong, the expectations of benefits was low, expecting the money to make up only 7% of overall retirement income.

At the other end of the spectrum, Belgian investors expected the government to provide 31% of retirement income, while only 78% wanted to learn more about investing.

The country with the highest anticipated retirement income reliance on the state was Spain, with the hope that the government will provide 39% of the needed income, although in this case there was also relatively strong interest in investment knowledge (92% want to know more).

Graphic: Investors state pension expectations and their desire to improve their investment understanding

The levels of expectation for state pension bear some resemblance to how generous pensions are today in different countries.

For instance, Spain has one of the most generous state pensions as a percentage of average earnings, according to analysis published by the Organisation for Economic Cooperation and Development, a think tank, in December 2015.

As the chart shows, other countries where expectations are high, such as Portugal, Belgium and the Netherlands, also have relatively generous pensions today.

Conversely, pensions in the UK and Chile are less generous today than in other countries, the OECD data suggests, and expectations for future state pension reliance are also low, according to the Schroders Global Investor Study.

Graphic: Value of basic and minimum pensions. Percentage of economy-wide average earnings

However, state pensions face challenges in countries with indebted governments and rapidly ageing populations. The OECD report said governments would reduce growth in the cost of pensions through “cuts in benefits for future retirees”.

It anticipated slower rises in state pension payments and increases in the age of entitlement to benefits. It said the normal age of retirement would rise for 20 year olds in more than half of the countries the OECD covers.

Turning attention back to Spain, where anticipation is highest for state support, major changes are underway. For example, the OECD points out that every five years from 2019, the initial pension benefit paid to new retirees will be adjusted based on life-expectancy gains.

Graphic: Thinking of your income for the duration of your retirement, what percentage of the total will (or has) come from the following income sources?

For the full story on the Global Investor Study and interactive infographic visit or download the full report below.

You can test your understanding of investments with our income IQ tool, which will reveal your behavioural biases and provide useful tips to empower you to make better investment decisions.


The views and opinions contained herein are those of Schroders’ investment teams and/or Economics Group, and do not necessarily represent Schroder Investment Management North America Inc.’s house views. These views are subject to change. This information is intended to be for information purposes only and it is not intended as promotional material in any respect.