The retirement dilemma – the voice of a generation

• 18 to 40-year-olds have little feeling for and trust in the Belgian pension system.
• Young people see pensions as a shared responsibility, with the government, the employer and themselves all needing to play a part to build up a decent pension income.
• They are in general worried about their financial situation after retirement.
• Their financial knowledge of pension planning is very limited.

PensioPlus, the umbrella organization of pension funds, commissioned a survey to understand how the younger generation of Belgians perceives pensions in general and private pension accrual in particular. The study was conducted in November and December 2020 and reached about 1,800 respondents between the ages of 18 and 40. The results of the perception study show that there is a strong distrust and concern regarding pensions which leads to a certain lack of engagement with pensions.

Pension indifference due to insufficient information characterizes this young generation

PensioPlus aims to give this generation a voice in the pension debate. After all, it is important to understand how younger generations perceive pensions, as their support is essential for the further growth and wider adoption of the second pension pillar (i.e. the supplementary pension).

The survey shows that respondents are very suspicious or even indifferent to the pension topic. They assign the Belgian pension system an average score of only 5.4 out of 10. The main reasons given for this poor score are:

• The pension amount is too low (30%);
• The retirement age is too high (19%);
• The system is too complex (17%);
• There is a lot of uncertainty about future pensions (16%); and
• The Belgian pension system seems to be unjust (14%).

In addition, about 60% of respondents indicated that they are not concerned about their pension because they perceive it as a distant topic far removed from their day-to-day life. This widely held opinion leads to the phenomenon of the ‘10-20 lost years’: during the first decades of one's career, there is hardly any personal pension accrual. Only as people get older do they start thinking about the topic of pensions.

One of the reasons for the indifference among the younger generation is the lack of knowledge and information. Participants indicate that their financial knowledge of pension planning is very limited (average score of 5.1 out of 10) and find the information they have access to regarding pensions to be insufficient. Although digital sources of information about pension accrual exist, such as MyPension, and they are positively rated by users, their use is limited within this generation. One in four participants with work experience indicated that they have never heard of MyPension, and only half of those who know the platform have actually used it.

Lack of confidence in the pension system leads to latent anxiety

In addition to the lack of engagement, there is a remarkable latent concern among the younger generation about retirement. People do not expect that they will be able to lead a comfortable life during retirement (50%), they are afraid that they will have to keep earning extra money (69%) or that they will run out of money (62%) and are in general worried about their financial situation after retirement (60%). This concern is fueled by a distrust in the pension system: 53% say that they are not confident that the government will be able to continue paying out pensions. About the same percentage is not optimistic that their future statutory pension will be sufficient to maintain their desired standard of living. It is worth noting that, on average, women express these concerns more than men and have a gloomier view of the financial aspect of retirement.

Supplementary pensions less known, role as investment capital

The respondents perceive pension accrual as a shared responsibility. They consider both the government (86%), the employer (80%) and themselves (76%) as being responsible for building up an adequate pension income. With regards to wage negotiations, a significant number of individuals (54%) would be willing to forego a wage increase in exchange for a better supplementary pension.

In order to be able to focus more on supplementary pensions, it is of course important that employees have the necessary knowledge of the second pension pillar. Our research shows, however, that this second pillar appears to be less well known than the third pillar: only 24% say they know the second pillar well, compared to 40% for the third pillar.

However, in 2020, almost four million employees and self-employed people were affiliated to a supplementary pension plan – albeit to a very diverse extent depending on sector and function. The combined provisions of the supplementary pensions amount to €92 billion and are therefore very relevant as an investment vehicle for various societal purposes.

PensioPlus notes there is still work to be done in order to boost confidence

Increasing young people's confidence in their pensions is of crucial social importance. All stakeholders have a role to play in this by making information available in an accessible manner and by putting the role of the second pillar forward. Our study indicates that young people see pensions as a shared responsibility, with the government, the employer and themselves all needing to play a part to build up a decent pension income.

We therefore feel that there is strong support among 18 to 40-year-olds to develop more knowledge and interest, as well as a better system, for pensions. If we succeed in providing young people with sufficient financial knowledge at the start of their careers and make them understand the importance of building up retirement savings as early as possible in their career, we will ensure that pensions remain affordable and adequate and that younger generations can grow old without financial worries.

Should you require any more information, please do not hesitate to contact Ann Verlinden, Secretary General at PensioPlus: Ann.Verlinden@pensioplus.be.