The Future of Retirement A balancing act. India Report

Transcription

1 The Future of Retirement A balancing act India Report

2 The research The Future of Retirement is a world-leading independent research study into global retirement trends, commissioned by HSBC. The global report, A balancing act, is the tenth in the series and represents the views of more than 16,000 people in 15 countries. The findings in this India report are based on a nationally representative survey of 1,000 people of working age (25 and over) and in retirement, and was conducted online by Ipsos MORI in August and September All references to retirees refer to people who are semi or fully retired. All references to income refer to gross annual household income.

3 Key findings Not starting to save early enough is the main barrier preventing working age people from adequately preparing for a comfortable retirement. Over half (52%) of working age people who are not adequately preparing say this is because they did not start saving early enough. With the benefit of hindsight, almost half (47%) of retirees would have started saving at an earlier age and over a third (38%) say that they would have saved more to improve their standard of living in retirement. Over a quarter (26%) of preretirees are not currently, or do not intend to start, saving specifically for retirement. Even more concerning, almost a fifth (21%) of those nearing retirement (aged 45 and over) are not saving or do not intend to save for retirement. More than a quarter (28%) of working age people say that their income is not keeping pace with the cost of living. Over a fifth (22%) of pre-retirees say the global economic downturn has had a direct and significant impact on their ability to save for retirement. 3

4 A life less comfortable More than one in ten (14%) working age people believe they will never be able to fully retire. Whilst many have positive reasons for continuing to work, such as wanting to keep active and keep their brain alert (70%), almost half (45%) believe they will not be able to maintain a comfortable lifestyle if they retire and almost a quarter (24%) say they cannot afford to retire. Living comfortably during retirement is a real concern for many. Almost three quarters (74%) of pre-retirees are concerned about having enough money to live comfortably in retirement. For women, this figure rises to 79%, compared with 71% of men. Age is also a factor; 80% of working age people aged 25 to 44 are concerned, compared with 69% of those aged 45 and older. What s more, the majority of working age people have more fundamental concerns about funding their retirement. More than seven in ten (71%) worry about having enough money to live on day-today in retirement and almost two-thirds (63%) are afraid of running out of money. All of this suggests that preretirees fear that life after work may be less comfortable than they might have hoped. Over two in five (42%) expect to have to cut down on everyday spending once they retire and over a third (34%) say they will have to travel less. Many pre-retirees are concerned about having enough money to live comfortably in retirement 74% of pre-retirees are concerned These retirement lifestyle concerns are an issue across all income levels: even amongst preretirees with a household annual income of more than Rs.425,000, the majority (73%) are not confident that they will be able to maintain a comfortable standard of living through their retirement years. Women are more concerned than men Female Male 71% 79% Q. To what extent are you concerned about the following in your retirement? (Having enough money to live comfortably) A. Very concerned or somewhat concerned (Base: Pre-retirees) 4

5 23% of retirees say they were not adequately prepared for a comfortable retirement Ready or not Retirees concede that in some cases they did not prepare adequately for retirement. Almost a quarter (23%) believe that their preparations were inadequate for a comfortable retirement. Likewise, there is a concern among some preretirees as well, with 14% saying that their preparations are insufficient. Some of the main reasons why people are not preparing adequately to maintain a comfortable standard of living in retirement are because they: Cannot afford it: Almost a third (30%) of pre-retirees say they cannot afford to prepare adequately. Have more immediate financial commitments: Almost a third (32%) of pre-retirees faced an unexpected event or expense and over a fifth (22%) say they are paying off their mortgage. Did not start saving early enough: Over half of pre-retirees (52%) admit they did not start saving early enough. Were not aware of how much to save: Over a quarter (28%) of pre-retirees say they did not realise how much they needed to save. 5

6 Juggling priorities For the majority (84%) of working age people, saving for retirement is not their main priority. Other priorities include saving for their children s education (26%), a deposit towards buying a home (9%) and saving for a rainy day (8%). Even with the best intentions, major life events have affected almost four in five (79%) preretirees retirement saving. While some of these events can be planned for, such as buying a home or paying a mortgage (41%), paying for their children s education (29%) or starting a family (15%), unexpected events can also have a significant impact. Unforeseen life events like illness can have a significant impact on a person s financial situation, before and after retirement. Almost one fifth (17%) of working age people faced an unexpected illness that stopped them or their spouse from working, with a knock-on effect on their retirement savings. The global economic downturn has also had a far-reaching impact. Around a fifth (22%) of pre-retirees say it had a direct and significant impact on their ability to save for retirement. It is also likely to have had an indirect effect on pre-retirees economic wellbeing, with 20% saying that a significant drop in earnings, losing their job (17%) or getting into debt/having severe financial difficulty (14%) affected their ability to save for retirement. 6

7 Life events have a significant impact on pre-retirees ability to save for retirement Buying a home/paying a mortgage 41% Paying for children s education 29% Global economic downturn Significant drop in earnings/pay cut 20% 22% Becoming unemployed Illness or accident preventing me/my spouse working Having to fund/pay for a dependant Starting a family Getting into debt/severe financial difficulty Starting work Having to stop work to look after someone Finishing full time education Paying for my own education 17% 17% 17% 15% 14% 14% 12% 11% 10% Q. Some people experience life events which impact significantly on their ability to continue saving for their retirement. Which, if any, of the following life events have ever impacted significantly on your own ability to save for retirement? Answers shown for responses of 10% or more. (Base: Pre-retirees) 79% of working age people have had their ability to continue saving for retirement impacted by a significant life event 7

8 Looking back, starting sooner With the benefit of hindsight, many retirees would have done things differently before they retired, to improve their standard of living in retirement. For example, close to half (47%) would have started saving at an earlier age and almost two in five (38%) retirees say they would have saved more. Almost two thirds (64%) of retirees say that retirement planning should start at the latest by the age of 40 if you want to maintain a similar standard of living after retirement. More than half (56%) of pre-retirees agree that you need to start planning by the age of 40. Almost a quarter (23%) of retirees and a similar proportion of pre-retirees (24%) say you need to start aged 30 or younger. Despite this, almost a quarter (26%) of pre-retirees are either not currently saving for their retirement or do not intend to start. Even among pre-retirees nearer to retirement - those aged 45 and over - almost a fifth (21%) are not saving or do not intend to start saving specifically for retirement. Almost two thirds of retirees say you need to start planning for retirement before the age of 40 23% 24% Aged 30 or younger Retirees 41% Aged Pre-retirees 32% 30% Aged % Q. What would you say is the latest age people can start planning for their retirement (assuming retirement at 65), and still expect to maintain in their retirement a standard of living similar to the one that they were used to when working? (Base: All) 6% 9% No particular age/don t know 8

9 26% of pre-retirees are not saving for retirement 9

10 The best laid plans - intentions versus reality There is a noticeable gap between pre-retirees intentions towards saving for their retirement and the reality as experienced by current retirees. Over their working life, preretirees on average plan to save 26% of their income towards retirement savings and investments (excluding pensions). In reality however, today s retirees actually saved only 20% of their income over the course of their working lives. Working age people plan to save 21-28% of their income towards their retirement savings and investments (excluding pensions) throughout their working life, with a constant 26-28% from the age of 30 onwards. Again, the current reality is different. Retirees saved a considerably lower share of their income (12-18%) when they were younger (between age 18 and 44), and only later in life (after age 45) increased the share of their income closer to their intended level, missing out on the full benefits of compound growth. Wishful thinking versus stark reality? Pre-retirees believe they will consistently save more than a quarter of their income towards their retirement savings and investments, throughout their lives. The stark reality for today s retirees was much lower. Share of income saved towards retirement savings and investments (excluding pensions) 20% 26% All ages 12% 21% Aged % 26% Aged % 28% Aged % Aged % Retirees Pre-retirees Q. Please type in the percentage of your annual income you saved for your retirement when you were in these age groups (Base: Retirees) Q. Please type in the percentage of your annual income you plan to save in the future for your retirement when you are in these age groups (Base: Pre-retirees) 10

11 Pre-retirees plan to save 26% of their income towards retirement savings and investments (excluding pensions) throughout their working lives; retirees saved only 20% 11

12 Confidence returns, but retirement savings still affected As the country recovers from the global economic downturn, financial confidence is increasing, with 73% of preretirees feeling more confident about their future financial prospects than a year ago. However, more than a quarter (28%) of working age people say that their income is not keeping pace with the cost of living. In addition, the global economic downturn continues to negatively impact how people save for their retirement. Compared to before the recent global downturn, many working age people have either stopped or reduced their retirement saving, whether through investments (17%), annuities (16%), employer pension schemes (11%) or personal pension schemes, cash deposits and insurance (10% each). Other savings are impacted. More than one in ten (11%) pre-retirees have either stopped or reduced their savings for their children s education. There is less money for luxuries, too. More than a fifth (21%) of pre-retirees who previously saved for a holiday and almost one in five (16%) who previously saved for a new car have either reduced these savings or stopped altogether. When it comes to good ways to generate income for retirement, around four in five (81%) retirees have confidence in cash deposits and employer pension schemes (80%), followed by second/buy-tolet properties (76%) and personal pension schemes (68%). Working age people feel more confident than today s retirees when it comes to good ways to generate income for retirement. Pre-retirees have the most confidence in cash deposits (88%), property (85%), insurance policies (81%) and personal pension schemes (80%). 12

13 Pre-retirees feel more confident than retirees about good ways to generate retirement income Cash deposits 81% 88% Employer pension scheme 76% 80% Property (second home/buy-to-let) 76% 85% Personal pension scheme 68% 80% Investments 66% 72% Insurance 66% 81% Annuities 49% 65% Retirees Pre-retirees Q. How confident are you that these are good ways to generate income for your retirement? A. Very or fairly confident. (Base: All) 73% of pre-retirees feel more confident about their future financial prospects than a year ago 13

14 Practical steps towards a better retirement Here are some important insights and practical actions drawn from the research findings, which may help today s retirement savers plan a better financial future for themselves. 1 retirement Start saving early Almost half (47%) of retirees say that starting to save earlier would have improved their standard of living in retirement. Not starting to save early enough was amongst the top reasons for pre-retirees (52%) feeling insufficiently prepared for a comfortable retirement. Retirement can seem a long way off when you are young. Nevertheless, it is crucial to start making plans as early as you can. 2 fund 3 Know how much you need Almost two in five (48%) retirees say they did not prepare adequately for a comfortable retirement because they did not realise how much they needed to save for their retirement. Start thinking about the kind of lifestyle you want when you retire and how much you will need to it. Refill the pot Around a fifth (22%) of working age people say the global economic downturn had a direct and significant impact on their ability to save for retirement. It may also have had indirect effects, with 20% saying that a significant drop in earnings, losing their job (17%) and getting into debt/having severe financial difficulty (14%) affected their ability to save for retirement. It is easy for retirement savings plans to suffer when times are hard. With the worst of the global economic downturn behind us, start looking for advice on how to replenish any depleted funds in your retirement pot. 4 do Expect the unexpected Close to one in five (17%) working age people say that illness or an accident has prevented them or their spouse from working and this significantly affected their ability to continue to save for retirement. Unforeseen life events can damage your retirement savings plans. No one can see into the future, but consider what could happen and how this will impact your financial planning. 14

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16 HSBC Holdings plc 2015 All rights reserved. Excerpts from this report may be used or quoted, provided they are accompanied by the following attribution: Reproduced with permission from The Future of Retirement, published in 2015 by HSBC Holdings plc. HSBC is a trademark of HSBC Holdings plc and all rights in and to HSBC vest in HSBC Holdings plc. Other than as provided above you may not use or reproduce the HSBC trademark, logo or brand name. Published by HSBC Holdings plc, London HSBC Holdings plc 8 Canada Square, London E14 5HQ 16