Lack of retirement readiness is an emerging global crisis for governments, employers and individuals, according to survey of individuals in the U.S., U.K., Japan, China and eight other countries released Tuesday by Aegon, an international insurance, pension and money management company.
Retirement readiness has worsened this year from 2012, the first year of Aegon's survey.
The 12 countries in the survey account for almost 85% of the $31 trillion in global pension assets, excluding social security funds, according to a report about the survey, “The Changing Face of Retirement: The Aegon Retirement Readiness Survey 2013.”
The U.S. accounted for 56%, or $17.5 trillion, of the global pension assets total as of the end of 2011. It was followed by the U.K. with 10%, or $3 trillion, of global pension assets.
The aggregate score of the 12 countries in the Aegon's Retirement Readiness index — a measure of how well participant expectations of retirement are likely to be fulfilled based on current attitudes and behaviors — fell to 4.89 from 5.19, on a scale of 1 (the lowest level of readiness) to 10 (the highest).
Scores fell in all 10 of the 12 countries where comparisons were available. Canada and China were not part of the 2012 survey.
Germany had the highest retirement readiness score in both years, 5.48 in 2013 and 5.88 in 2012. It was followed in 2013 by China at 5.41, Canada at 5.24 and the U.S. at 5.19.
Japan was the lowest for both years at 4.30 in 2013 and 4.63 in 2012.
“Although there are signs of economic recovery, there are certain countries,” such as Spain, “still going through a difficult time," Catherine Collinson, president, Transamerica Center for Retirement Studies, which collaborated with Aegon to produce the survey, said in a teleconference Tuesday about the decline in the index.
The other countries in the survey were France, Hungary, the Netherlands, Poland and Sweden.
For the report, a total 12,000 individuals, including 10,800 workers — 1,000 in each country — were surveyed between Jan. 22 and Feb. 11.
Germany scored highest because respondents feel better prepared for retirement in countries that have very well developed pension programs, while China scored second highest even though its retirement system is underdeveloped, because respondents have an optimistic outlook about the economy, Mark Twigg, executive director, Cicero Group, a communications consulting firm, said in the teleconference. Cicero designed and analyzed research for the report.
Taking individual responsibility for retirement planning, saving and investing is becoming paramount in retirement readiness, as countries across the survey are shifting responsibility to individuals, said Angela Seymour-Jackson, managing director, workplace solutions, Aegon UK.
Among the report’s recommendations, governments and employers must provide support such as through options for a phased retirement, planning tools and information, for individuals to transition to a secure retirement.
In addition, individuals should think more realistically about their needs and goals, because they have a tendency to exaggerate what they need to do and underestimate what they can do, Mr. Twigg said.