15th May 2013
Lack of preparedness for retirement is not just a UK phenomenon according to the Aegon Retirement Readiness Survey which examines attitudes to retirement in Europe, North America and Asia.
The research from nonprofit foundation Transamerica Center for Retirement Studies in collaboration with Aegon shows a lack of retirement preparedness among workers in the U.K. and around the world. Researhers surveyed 12,000 workers and retirees in 12 European, North American and Asian countries to find that just 12 percent are “very optimistic” that they will have enough money to live on when they are retired.
Nearly two-thirds of U.K. respondents or 65 percent believe future generations will be worse off in retirement than current retirees. The global financial crisis has led respondents to expect reductions in benefits with 63 percent expecting their government retirement benefits will be less valuable due to government cutbacks. Forty-four percent of employees surveyed expect their employer or pension fund will reduce their workplace retirement benefits.
Many younger employees expect that it will be necessary during their own retirement to also provide financial support to aging family members. Thirty per cent of employees between the ages of 18 and 24 expect that they will have to provide financial support to aging parents, compared to 16 percent of employees between 35 and 44 and only 8 percent between 55 and 64.
“Expectations of reduced benefits, rising longevity and inadequate savings is threatening to ‘squeeze’ younger generations who face having to support older generations in retirement,” said Angela Seymour-Jackson, Managing Director of Workplace Solutions at Aegon UK. “This pending squeeze illustrates the urgency to strike a more harmonious balance among the roles and responsibilities of governments, employers, and individuals in providing for retirement.”
An obvious and practical solution for bridging the retirement savings gap is to enable current employees to delay retirement and continue working beyond traditional retirement age. The majority of employees or some 62 percent expect to work longer due to the global financial crisis.
Yet this solution is not straightforward and may be unrealistic for many. Of the retirees surveyed, nearly half or 49 percent retired sooner than expected. Of those retirees surveyed, the majority of those retiring early did so for negative reasons, such as health issues 42 percent or job loss 23 percent while only 7 percent retired sooner because they had saved enough.
“Delaying retirement can be a means of bridging a savings shortfall,” said Seymour-Jackson. “However, life’s unforeseen circumstances can derail the best of plans. It’s critical to have a backup plan if retirement arrives sooner than expected.”
This survey found that 43 percent of employees would like to transition gradually into retirement by changing work patterns for example by working part-time, or taking less demanding responsibilities). What’s unclear is whether employers are willing to accommodate such a transition into retirement. Only 21 percent of employees indicate their employer offers the option to move from full-time to part-time work.
“Across the world, thousands of Baby Boomers are turning 65 every day. Many of them are not financially ready for retirement and are seeking to extend their working careers by continuing to work full-time or part-time,” said Seymour-Jackson. “Governments and employers can help employees achieve retirement readiness while retaining valuable talent by offering transition options for older workers nearing retirement.”
The report suggests that what it calls widespread retirement illiteracy has worsened readiness with only 20 percent of respondents saying they are “very able” to understand financial matters related to retirement planning.
Other key measures:
Nine percent of people globally say their personal retirement planning process is “very well developed.”
Nine percent have a written plan for retirement.
Thirty-nine percent of employees globally do not know if they are on course to achieve their desired retirement income.
The Aegon Retirement Readiness Survey 2013 is a collaboration between the Transamerica Center for Retirement Studies and Aegon. The survey encompasses 12,000 employees and retirees in 12 countries: Canada, China, France, Germany, Hungary, Japan, the Netherlands, Poland, Spain, Sweden, the United Kingdom and the United States. These countries were selected on the basis of their distinctive pension systems, as well as their varying demographic and aging trends.