NEXT. Retirement Facts. Prepared by Aon Hewitt Health & Benefits Aon BenefitsPLUS

Transcription

1 Retirement Facts

2 Introduction The aim of this document is to provide useful generic background information to nationals from the above countries / regions that may be of interest in respect of any retirement planning arrangements they may already have or wish to consider putting in place. It will highlight some of the key facts / challenges surrounding retirement planning in those countries / regions as well as putting into them into context beside the concerns / challenges facing retirement savers globally. It will also highlight some of the main concerns / considerations that will need to be taken into account before any prudent retirement plan is implemented. Please be aware that this document does not constitute financial advice on your specific situation, if you require further information please seek professional advice from a licenced financial advisory representative. 2

3 Retirement: The Global View NB - SINGAPORE DOES NOT HAVE A STATE SPONSORED PENSION 3

4 Thoughts on retirement globally Life insurers are not the first source of retirement information consumers would turn to. Q: Where would you go, in order of priority, to get information on the best retirement product for you? 51% Independent advisor 44% Friends & family 41% Life insurance company 39% Bank 38% Government organisation 35% Consumer association 31% Media 20% Employer 4

5 Thoughts on retirement globally While most consumers believe it is important to save for their retirement, this varies from country to country. Q: How important is it for you to save now for your retirement? Somewhat important Very important 5

6 Retirement around the World State Schemes 6

7 Common concerns for expatriates in Singapore Portability if I leave my current employer or leave Singapore, does my plan stay with me? Multi-currency options if I move to another country, can I pay or have investments in other currencies? Taxation how tax efficient are the potential retirement solutions based on my nationality? Flexibility if I lose my job, can I reduce my contributions or stop paying? Can I make withdrawals before I retire? Existing plans in other countries What can (or should ) I do with my existing benefits from previous arrangements (in other countries)? 7

8 What is your nationality / where are you from? American Australian Please click on the relevant flag British European Singaporean 8

9 UK Retirement Facts Retirement Facts United Kingdom Summary Population over 60 in % The United Kingdom s retirement Projected population over 60 in % Social pension? Yes Pension credit (Guarantee Scheme information Credit) 1909 (first scheme Year introduced introduced) Monthly pension benefit 949 US$ % Average Income 27.27% Age of eligibility 65 (to 68 by April 2044) Targeting Means-tested % of population over 60 covered 8% Total cost Sources: % of GDP income system comprises a flat-rate public pension supported by an income-tested pension credit; an earnings-related pension based on re-valued average lifetime salary; and voluntary private pensions, which may be occupational or personal. From 2016 the state flat rate and earnings-related pension components will be replaced with a single tier state pension. Auto enrolment is currently being phased in, requiring employers to enroll employees in pension schemes with minimum contributions (increasing to 8% in 2018), with the facility for employees to opt out. 9

10 Facts about retirement in the UK UK UK government in discussions to increase the state pension eligibility from ages 62 (women) and 65 (men) to 68 years old by 2044 Fixed retirement age in UK? Maximum annual state pension? 7,488 None. This was abolished in ,000 average retirement savings amount for those who did NOT take professional financial advice. Sources: ,000 average retirement savings amount for those who took professional financial advice. 10

11 UK Thoughts on retirement from the UK 40% of Brits aged 55+ think they do not earn enough to save adequately for their retirement 45% selected an insurer as the one of the most likely choices for helping them with their retirement plans, 51% selected a bank 65% of British consumers are worried about how they will fund for their retirement 56% Plan on working during their retirement Sources: Aviva Real Retirement Report UK 11

12 UK Typical retirement savings considerations UK pension reforms - What are they and how do they affect you? Retirement Savings Plans - What can you save / invest into whilst you are away from the UK? UK State Pension - find out from UK Pensions Office to check benefits and eligibility. chment_data/file/324636/br1.pdf Frozen Benefits from previous employment - what are your options? 12

13 Australia Retirement Facts Retirement Facts Australia Summary Population over 60 in % Australia s retirement income Projected population over 60 in % Social pension? Yes Scheme information Age Pension Year introduced 1900 Monthly pension benefit 1427 US$ % of Average Income 26.10% Age of eligibility 65 (to age 70 from 1 July 2035) Targeting Means-tested % of population over 60 covered 51% Total cost 2.23% of GDP Sources: system comprises a means-tested age pension (paid from general government revenue); a mandatory employer contribution paid into private sector arrangements (mainly defined contribution plans); and additional voluntary contributions from employers or employees paid into these private sector plans. 13

14 Australia Facts about retirement in Australia 228,000 Australian retirees chose to return to work in % of people over 65 own their own businesses Cost of a modest lifestyle $ per week Cost of a comfortable lifestyle $ per week 56% of Australian retirees say that start saving at an early age is the best financial advice they have ever received Sources ABS Retirement and Retirement Intentions, Australia, July 2010 to June McCrindle: Older Workers, Downwagers, and Redefining AFSA Retirement Standard, March Quarter

15 Australia Thoughts on retirement from Australia 17% of Australians intend to retire at age 70 or older, 49% of Australians intend to retire between the ages of years old Only 3.5% of Australians retirees expect to have more than enough money to maintain their lifestyles in retirement 49% of those yet to retire will rely on superannuation, annuity or allocated pensions as their main source of income 21 v 11 - people expect to spend 21 years in retirement but their savings to run out after 11 years Sources &issue=July%202012%20to%20June%202013&num=&view=

16 Australia Typical retirement savings considerations Pension reforms - What are they and how do they affect you? Age Pension - check benefits and eligibility. rcombinedstart.do Super / Retirement Savings Plans - What can you can continue to manage or save / invest into whilst you are away from home? Where will you retire? 16

17 USA Retirement Facts Retirement Facts United State of America Summary Population over 60 in % The United States retirement income Projected population over 60 in % Social pension? Yes Old age Supplementary Scheme information Security Income 1935 (first national scheme Year introduced introduced) Monthly pension benefit 721 US$ % of Average income 15.84% Age of eligibility 65 Targeting Means-tested % of population over 60 covered 3% Total cost 0.07% of GDP Sources: system comprises a social security system with a progressive benefit formula based on lifetime earnings, adjusted to a current dollar basis, together with a means tested top-up benefit; and voluntary private pensions, which may be occupational or personal. 17

18 Facts about retirement from the US USA 35% of Americans aged 65+ rely completely on Social Security 50% of Americans have less than $10,000 in retirement savings 36% of Americans currently do not have anything saved for their retirement IRAs only account for 27% of the US retirement market, 55% of survey respondents have limited awareness of retirement products available, 28% of respondents considered themselves to have no awareness. Sources: Accenture Global Retirement Services Survey

19 USA Typical retirement savings considerations Tax considerations - income that has been excluded from income tax (e.g. using foreign earned income and foreign housing exclusions) can not be used for IRA Restricted access for US nationals to local schemes - although there are some options What are the IRS approved IRAs available for US nonresidents to continue investing in whilst they are overseas? Logistically Managing US based accounts whilst based overseas 19

20 Retirement Facts Europe Retirement Facts France Italy Spain Germany Average Population over 60 in % 27% 22% 26% 24% Projected population over 60 in % 46% 44% 56% 46% Social pension? Yes Yes Yes Yes Scheme information Source: Allocation de Solidarité aux Personnes Agées (ASPA) Assegno sociale (Social Allowance) Pension no Contributiva de Jubilacion (Non-contributory pension for retirement) Needs-based pension supplement (Grundsicherung im Alter) Year introduced Monthly pension benefit 1078 US$ 630 US$ 498 US$ 450 US$ % of Average income 29% 21% 20% 18% 22% Age of eligiblity and 3 months Targeting: Means-tested Means-tested Means-tested Means-tested % of population over 60 covered 4% Not Known 2% 2% 3% Total cost 0.25% of GDP Not Known 0.12% of GDP Not Known 20

21 Europe Thoughts on retirement from the EU 49% of those yet to retire will rely on superannuation, annuity or allocated pensions as their main source of income Of those who expect to work beyond official retirement age, over 2/3rds think that they will be working for two years or more, with the majority of these assuming that they will work for two to five years longer 34% of Europeans say they are happy with the minimum state retirement age being raised in their country, and even that they expected this to happen The average European thinks that he or she will need to retire on 74% of their annual salary in order to live comfortably but they will actually have only 57% of their salary as a retirement income. Sources Aon Consulting Expectations vs. Reality: Meeting Europe s Retirement Challenge 21

22 Europe Typical retirement savings considerations Pension reforms in your home nation- What are they and how do they affect you? Retirement Savings Plans - What can you save / invest into whilst you are away from home? State Pension - find out from your home nation pensions office to check benefits and eligibility. Existing / Frozen Benefits from previous employment - what are your options? 22

23 Retirement Facts Singapore Retirement Facts Singapore Summary Population over 60 in % Singapore s retirement income system is based on the Projected population over 60 in % Social pension? No Central Provident Fund (CPF) which covers all employed Singaporean residents. Some benefits are available to be withdrawn at any time for specified housing and medical expenses with other benefits preserved for retirement. A prescribed minimum amount is required to be drawn down at retirement age in the form of a lifetime income stream (through CPF Life). The Singapore government has announced upcoming changes to CPF for 2014 which include providing minimum pension top-up amounts and more flexibility in drawing down retirement pension amounts. Sources: 23

24 Singapore Thoughts on retirement from Singapore 44% of Singaporeans have yet to start saving for their retirement For 64% of Singaporeans who have begun saving/investing for retirement, CPF remains the main source of their retirement savings Only 1 in 3 people expect to be able to retire at their preferred retirement age (before age 60) 53% of Singaporeans are worried that they will not be able to afford an adequate standard of living in retirement Source: Aviva Real Retirement Report

25 Singapore Typical retirement savings considerations CPF if you are already using your CPF funds for home purchase, are you making sufficient provisions for retirement? SRS (Supplementary Retirement Scheme) What other tax retirement planning tools are available to you? Additional options what other solutions can you consider that will provide you with additional income in retirement? Enhanced Lease Buyback Scheme (LBS) for those without sufficient retirement funds but too close to retirement to be able to plan 25

26 What can I do and what are the next steps? NB - SINGAPORE DOES NOT HAVE A STATE SPONSORED PENSION 26

27 The next steps 1. Contact an adviser to arrange a meeting for a retirement planning consultation without obligation at BenefitsPLUS@aon.com (click on the link) or call Click here for more information about the Aon Hewitt Wealth Management Retirement Seminar and Networking event on Thursday 14 th May at the new Aon Offices NB - SINGAPORE DOES NOT HAVE A STATE SPONSORED PENSION 27

28 Finally, typically how much will you need to save? Monthly income required Savings Needed for 20 Years of Income Monthly Savings for 20 years Savings Needed for 30 Years of Income Monthly Savings for 20 years $1,000 $166,696 $366 $212,150 $466 $2,000 $333,392 $732 $424,300 $931 $3,000 $500,087 $1,098 $636,450 $1,397 $4,000 $666,783 $1,463 $848,601 $1,862 $5,000 $833,479 $1,829 $1,060,751 $2,328 $6,000 $1,000,175 $2,195 $1,272,901 $2,794 $7,000 $1,166,871 $2,561 $1,485,051 $3,259 $8,000 $1,333,567 $2,927 $1,697,201 $3,725 $9,000 $1,500,262 $3,293 $1,909,351 $4,190 $10,000 $1,666,958 $3,658 $2,121,501 $4,656 The above sums assume your portfolio will earn a 6 percent annualized return during the course of your retirement and endure 2 percent annual inflation erosion. Contact an adviser at BenefitsPLUS@aon.com 28

29 Thank you for your time General Information Only The information provided in this presentation is made available on an as is basis, without warranty of any kind. It is not intended for distribution to, or use by, any person or entity in any jurisdiction or country where such distribution or use will be contrary to local law or regulation. Aon is not an insurer Aon Singapore Pte. Ltd. is not an insurer. Any insurance product is underwritten by the insurer identified in the insurance policy and not by us. This presentation is not a contract of insurance nor an offer or solicitation by us to enter into any contract of insurance. You should apply for this product only if it is suitable for your specific risks and needs. Where we provide (upon your request) you with more information concerning the product, this in itself shall not be taken to be a representation or warranty by us that the product is suitable for you. Please seek advice Please seek advice from us or another professional adviser if you are uncertain as to whether this product is suitable for you. A professional adviser will be able to take into account your financial situation or particular needs, before advising you on the suitability of the product. If you choose not to seek advice from a professional adviser, you must consider for yourself if the product is suitable for your specific risks and needs. Your decision to proceed to purchase the product constitutes your consent and confirmation that you have determined that the product is suitable for your specific risks and needs and that we will not be required to seek alternative quotations or identify alternative products for your consideration. Copyright Aon Singapore Pte Ltd ( Aon ) CRN W All rights reserved. 29