With individuals around the world relying on governments to provide nearly half of their retirement income, greater collaboration is needed between government, employers and savers, according to Aegon.
According to Aegon's Retirement Readiness Survey, published on Monday (May 20), individuals are relying on the government to provide 46 per cent of their total retirement income, alongside 30 percent from their own savings and 24 per cent from employer retirement benefits.
But this is expected to shift more towards personal savings in the future as government backed pensions become less generous.
In response, Aegon called for a new framework for retirement savings.
The report stated: "With the proportion of these sources of retirement income expected to increasingly shift towards personal savings, individuals need to be proactive in anticipating and developing their retirement plans.
"People need the help of employers and governments through the establishment of a more a supportive framework that can help them make sound decisions."
The provider suggested that employers should provide employees with more information regarding the ages at which workers are eligible to receive benefits under any workplace retirement savings plan, as well as how to access information on social security and other government retirement benefits.
They should also remind workers of this information as they come closer to retirement age.
Businesses should also provide workers with the flexibility to transition into retirement by offering part-time or reduced capacity work, said Aegon, as well as accommodating employees’ physical and mental limitations as they age, in the same way employers accommodate those with disabilities.
The provider also called on governments to offer better tax incentives on a global level to encourage individuals to save for retirement through workplace schemes as well as personal pensions.
Tax reliefs could also be introduced for long-term care to encourage people to save for the possible need for care in older age, said Aegon.
In the UK people are given tax reliefs on their pension savings and the majority of workers are now auto-enrolled into a pension. But the government is still struggling to solve the growing long-term care crisis the country is facing.
Aegon’s 80-page survey of 14,400 workers and 1,600 retired people across 15 countries spanning Europe, the Americas, Asia and Australia found that workers expect that they will need to replace 68 per cent of their current income in retirement, yet only 25 per cent feel they are on track to achieve that level of retirement income.
It also found that only 29 per cent of workers globally are extremely or very confident that they will be able to retire in a lifestyle they consider comfortable.
Although 24 per cent of individuals admit feeling stressed about their long-term plans for retirement, just one quarter (26 per cent) of workers globally are currently offered the option of moving from full-time to part-time work as an alternative to taking full retirement.
Aegon’s research also found that the two most cited retirement concerns among people globally were declining physical health (50 per cent) and running out of money (40 per cent).
In the report Aegon highlighted five things for individuals to do now so that they are better prepared for retirement.
One suggestion was to save early and become a "habitual saver" as the research revealed that only 39 per cent of individuals saved regularly.
Other recommendations included developing a written plan for retirement and creating a back up plan in case of unforeseen circumstances such as not being able to work up until retirement age.
Ricky Chan, director at IFS Wealth & Pensions, said: "Having a backup plan is important because life is not smooth sailing.
"For example a financial planner will typically incorporate various ‘what if’ scenarios, such as a premature death of a spouse and an untimely market crash affecting investments. This prompts a discussion with the client on how they’d respond to cope with these unforeseen events, which in turn better prepares them if the worst game to worse.
"By going through this process, one would hope that more people become consciously aware of their savings and spending habit, so have a higher chance of being financially independent and live the lives they (and their family) want in future."
The research also found that globally fewer than half (48 per cent) of people have factored healthcare costs into their retirement savings.
But Aegon also found that many retirees (39 per cent) retired sooner than they planned and the main reason for this was ill-health (34 per cent).
The provider recommended changes to lifestyle, such as eating healthily and exercising, as well as continuing education to keep job skills up to date and relevant.
Mr Chan said: "Aegon’s recommendations are very reasonable as they apply the principles behind good financial planning. When clients engage with a good financial planner, it is very important to ‘begin with the end in mind’, which includes asking great questions, listening intently and understanding what the client is looking to achieve to give them fulfilment.
"Essentially this is helping the client to understand the lifestyle they want to live and how much it’ll cost.
"Simple principles such as ‘paying yourself first’ every month are very powerful at accumulating wealth over time, particularly as the money will benefit from compound interest/growth."
amy.austin@ft.com
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