State Street Global Advisors Defines the Formula for Retirement Happiness

State Street Global Advisors, the asset management arm of State Street Corporation (NYSE: STT), announced today that it has defined a ‘formula for retirement happiness.’

In a new research paper, entitled ‘The Global Retirement Reality Report: The Happiness Formula’, State Street Global Advisors compared objective rankings of various retirement systems with qualitative results from a survey of over 9,500 respondents in eight countries1.

It found that the retirement structures with the highest objective rankings did not necessarily correspond to the happiest respondents.

For example, the Netherlands consistently ranks as one of the strongest retirement systems in the world; it has the highest Melbourne Mercer Global Pension Index ranking and maintains a very high level of coverage, participation and savings rates. However, the Netherlands has the lowest level of satisfaction in retirement of all the countries surveyed.2 Meanwhile, in the US, those savers in a DC plan are very confident and optimistic about their prospects and indeed are generally happy in retirement, despite comparatively low levels of saving and a low index ranking.

The report found that the key factors driving retirement happiness were a combination of trust in a country’s retirement system stability, a strong feeling of ownership regarding their own outcomes and being well prepared in terms of accumulated retirement assets.

Here are the key findings from the report:

• Trust: Stability and credibility of a country’s retirement system engenders trust whereas recent change or the expectation of change at the policy level, such as alteration of retirement age, erodes trust. For example Italy has recently undergone painful reforms to the pension system and Germany and the Netherlands are on the cusp of reforms; this erodes trust. However, if these reforms are successfully implemented and individuals embrace their roles in the new system, these countries could look more like Sweden (one of the happiest retirement countries) with an established and well-understood, sustainable system.
• Ownership: Individuals who embrace ownership of, and feel that they have control over, their retirement outcomes are happier. If people accept that they are responsible for their retirement and understand the choices that they can make, they feel more secure. Respondents in the US and Australia, where there is a long tradition of individual retirement responsibility through Defined Contribution savings, were the happiest in our survey. Despite having lower assets, the UK and Ireland have potential to be moving towards these models
• Preparedness: Having sufficient retirement assets is critical in determining retirement readiness and satisfaction. The challenge faced by many is determining how much is “enough” and understanding whether savings will be sufficient. In addition, the study highlighted that few people understand how to convert a relatively large lump sum into a dependable income for life, making the definition of sufficiency elusive. Italian and Irish respondents, in particular, were concerned that they were not prepared for retirement.

As a result of the findings, State Street recommends the following key takeaways based on the happiness formula:

• Trust: Keep retirement plans as simple and stable as possible: Avoid making changes, or when changes have to be made, communicate them well in advance and provide clear and comprehensible illustrations of the probable impact
• Ownership: Build workers’ confidence in owning their retirement destiny and reward good behaviors they take: Illustrating the impact of actions that participants can take, such as changing their savings rate, retirement age or investment allocation can build confidence and increase ownership. Providing easy access to trustworthy sources of guidance – whether online, in person, or by phone – is also important.
• Preparedness: Enable workers to assess the sufficiency of their retirement assets to help put retirement into perspective: Provide participants with clear income projections so that they can understand whether they are on track for a secure retirement and educate them on how much they would need to save to achieve certain goals

“As is the case with happiness more generally, there is not one driver, but several elements that combine to enable a happy and secure retirement,” Nigel Aston, global head of strategy and proposition at State Street Global Advisors. “By observing retirement realities through the eyes of the individual saver, we are working to truly understand people’s experiences with state and institutional structures globally. By doing so, we can offer solutions that are as multidimensional as the needs of the people, plans, and policies involved. Happiness is important and evolving as our lives evolve.”

“From these findings, we hope to have arrived at a blueprint for a successful retirement structure that combines effective practices with rewarding retirement experiences, gathered from around the world,” said David Ireland, head of Global Defined Contribution at State Street Global Advisors. “With this study, we are looking to identify the factors across a number of retirement systems that drive retirement happiness, which can become best practices that are applied as retirement systems shift to have an increased reliance on the Defined Contribution model.”

The full report can be found here

About State Street Global Advisors

For four decades, State Street Global Advisors has served the world’s governments, institutions and financial advisors. With a rigorous, risk-aware approach built on research, analysis and market-tested experience, we build from a breadth of active and index strategies to create cost-effective solutions. As stewards, we help portfolio companies see that what is fair for people and sustainable for the planet can deliver long-term performance. And, as pioneers in index, ETF, and ESG investing, we are always inventing new ways to invest. As a result, we have become the world’s third largest asset manager with nearly US $2.72 trillion* under our care.

*This figure is presented as of June 30, 2018 and includes approximately $33 billion of assets with respect to SPDR products for which State Street Global Advisors Funds Distributors, LLC (SSGA FD) acts solely as the marketing agent. SSGA FD and State Street Global Advisors are affiliated.

Investing involves risk including the risk of loss of principal. Equity securities may fluctuate in value in response to the activities of individual companies and general market and economic conditions. This material should not be considered a solicitation to apply for interests in the Funds and investors should obtain independent financial and other professional advice before making investment decisions. There is no representation or warranty as to the currency or accuracy of, nor liability for, decisions based on such information.

Australia: State Street Global Advisors, Australia, Limited (ABN 42 003 914 225) (AFSL Number 238276) ("SSGA"). Registered office: Level 17, 420 George Street, Sydney, NSW 2000, Australia • Telephone: +612 9240‐7600 • Facsimile: +612 9240‐7611 Web: www.ssga.com.au

Belgium: State Street Global Advisors Belgium, Chaussée de La Hulpe 120, 1000 Brussels, Belgium. Telephone: 32 2 663 2036, Facsimile: 32 2 672 2077. SSGA Belgium is a branch office of State Street Global Advisors Limited. State Street Global Advisors Limited is authorised and regulated by the Financial Conduct Authority in the United Kingdom.
Ireland: State Street Global Advisors GmbH, Brienner Strasse 59, D‐80333 Munich. Authorised and regulated by the Bundesanstalt für Finanzdienstleistungsaufsicht (“BaFin”). Registered with the Register of Commerce Munich HRB 121381. Telephone +49 (0)89‐55878‐400. Facsimile +49 (0)89‐55878‐440. www.ssga.com

Germany: State Street Global Advisors Ireland Limited is regulated by the Central Bank of Ireland. Incorporated and registered in Ireland at Two Park Place, Upper Hatch Street, Dublin 2. Registered Number: 145221. Member of the Irish Association of Investment Managers. T: +353 (0)1 776 3000. F: +353 (0)1 776 3300.

Italy: State Street Global Advisors Limited, Milan Branch (Sede Secondaria di Milano) is a branch of State Street Global Advisors Limited, a company registered in the UK, authorised and regulated by the Financial Conduct Authority (FCA ), with a capital of GBP 71'650'000.00, and whose registered office is at 20 Churchill Place, London E14 5HJ. State Street Global Advisors Limited, Milan Branch (Sede Secondaria di Milano), is registered in Italy with company number 06353340968 ‐ R.E.A. 1887090 and VAT number 06353340968 and whose office is at Via dei Bossi, 4 ‐ 20121 Milano, Italy • Telephone: 39 02 32066 100 • Facsimile: 39 02 32066 155.

Netherlands: State Street Global Advisors Netherlands, Apollo Building, 7th floor Herikerbergweg 29 1101 CN Amsterdam, Netherlands. Telephone: 31 20 7181701. SSGA Netherlands is a branch office of State Street Global Advisors Limited. State Street Global Advisors Limited is authorised and regulated by the Financial Conduct Authority in the United Kingdom

United States: State Street Global Advisors, One Iron Street Boston, Massachusetts 02210

United Kingdom: State Street Global Advisors Limited. Authorised and regulated by the Financial Conduct Authority. Registered in England. Registered No. 2509928. VAT No. 5776591 81. Registered office: 20 Churchill Place, Canary Wharf, London, E14 5HJ. Telephone: 020 3395 6000. Facsimile: 020 3395 6350.

© 2018 State Street Corporation - All Rights Reserved

Tracking number: 2267947.1.1.GBL.PR

Expiration date: 06/30/2019

1 Germany, Italy, Netherlands, Sweden, Ireland, UK, US and Australia
2 The Global Retirement Reality Report: The Happiness Formula (pp12-13)

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