The security of a good pension partly determines a person’s sense of happiness. This is evident from an international study of three thousand employed and retired people from eleven European countries. The study was conducted by APG Research and funded by Tilburg University. This makes pension quality, in addition to mutual trust and a good (current) income, a third determinant of well-being. And no one is more positive about their pensions than the Dutch, researchers Eduard Ponds and Evert Webers discovered.
What determines whether someone feels happy? That question has intrigued scientists worldwide for decades. Every year since 2012, for example, a leading club of scientists has published the World Happiness Report, which indicates how happy the average resident of a country is. Social capital - trust among people - and economic capital - income - invariably play a decisive role. The latter fact inspired APG Research to conduct a new international study: what is the relationship between pensions and feeling happy? Is pension capital something to be taken into account too?
The responses from more than three thousand respondents in eleven European countries showed that there is indeed a strong relationship between pensions and happiness. Representative panels of employed and retired people were asked to rate the pension system in their country. Eduard Ponds (senior researcher at APG and professor at the Tilburg University) and Evert Webers (researcher at APG) discovered that the perceived quality of pension institutions appears to be a third determinant of well-being. The Netherlands, Ireland and the United Kingdom lead the way in satisfaction here, while Estonia, Italy and Greece are the least enthusiastic.
Fair, comprehensible and reliable
Despite all the squabbling over the new pension law, Dutch people rate their pension system much more positively than residents of other countries. They are more likely to consider it fair and easy to understand and they are relatively confident that their retirement income will be sufficient to allow them to continue their lifestyle. An opinion they share with professionals: the Dutch pension system is routinely ranked among the best in the world by Mercer and Allianz.
Another surprising fact: most Dutch people also have a lot of confidence in pension providers and in the government (when it comes to pensions). “More so than residents of other European countries. There is a lot of criticism of the pension system in the media, but our research shows that Dutch people feel the pension system is fair for all Dutch people. We had not been aware that the difference in confidence between our country and other countries is so big,” Webers tells us.
Pension security makes people feel happy
To investigate the relationship between retirement income and a feeling of happiness, Ponds and Webers first charted the happiness levels of individual European countries. Then they analyzed the extent to which this is related to pension satisfaction.
Dutch working and retired people - compared to the rest of Europeans - feel happier more often. For four out of ten working people, their future pension arouses a sense of happiness. Among pensioners, as many as seven in ten experience this.
In other European countries, feelings vary. In some countries, such as Ireland and the UK, for five in 10 workers, thinking of retirement makes them happy. But in Estonia, for example, only two in ten working people feel that way.
Pension systems explain differences
Ponds suspects that many differences can be explained by the pension systems countries have in place. “You see that people who are less happy live in countries where the pension system is mainly regulated by the government, such as France, Greece and Italy. There, pensions have to be financed largely by the working people.” This so-called pay-as-you-go system brings with it many uncertainties. After all, especially with an increasingly aging population, people don’t know if there is still going to be enough working people in the future to provide for their pensions. And the future political situation also plays a role: how will it turn out?
“A funded system, which for example the Netherlands, Ireland and the UK have for their employee pensions, offers a lot more security,” says Ponds. “It puts real money into your pot, saved in the past through private pension funds. No one can touch that. The survey results therefore strongly suggest that the Dutch pension system, regardless of all the criticism it receives, is a key factor in why the Netherlands is one of the happiest countries in the world.”
Positive emotions
Ponds and Webers also examined what emotions pensions evoke. Webers: “Until now, pension research has not paid much attention to this. But what people feel and think about pensions does determine the choices they make. And also whether they look forward to or dread retirement. The differences in this between the various countries are dramatic, which is also interesting.”
Again, compared to people in other countries, the thought of retirement was found to evoke positive emotions such as happiness, calmness and a sense of control more often among the Dutch. Finland and Ireland also score high. Countries with a lot of pay-as-you-go pensions, on the other hand, experience those optimistic feelings the least, such as Greece and Estonia.
Still a lot of questions
The survey results produce expressed opinions, while at the same time they also raise questions that Ponds and Webers would like to explore further. Like the fascinating fact that, according to the World Happiness Report, Finland has been the happiest country in the world for years, but you don’t see that sense of happiness reflected in the assessment of their pension system.
However, this research does clarify that pensions undoubtedly help determine well-being. Ponds: “The World Happiness Report and other research institutes should therefore include pension capital as an indicator of this. Pension capital depends on how you finance your pension system and on how much of a role the government plays in the private sector. We found that this division of tasks is a significant factor in the level of happiness in the various countries.”