The Future of RetirementThe power of planningUK Insurance Holdings Limited8 Canada Squar...
Foreword IntroductionHSBC’sThe Future of Retirement programme isa world-leading independent study into globalretirement tr...
The Future of Retirement4 5Retirement landscapeThe retirement landscape for the ‘baby-boomer’generation, which is now ente...
Nearly one-quarter of Britons expect to be much worseoff than their parents in retirement.This rises to nearlyone-third of...
Shortfalls in retirement preparednessOur findings reveal a ‘preparedness gap’ amongstrespondents. 93% of those we surveyed...
The Future of Retirement10 11The power of planningTable 1:The four consumer typesGlobal(% ofglobalrespond-ents)UK(% of UKr...
The Future of Retirement12 13The advice advantageThose who have a financial plan in place and soughtprofessional advice ar...
hsbc future of-retirement-uk-report
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hsbc future of-retirement-uk-report


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This report lets you see for yourself what others
think and feel about their retirement. I hope it will
also encourage some readers to take more control
of their own financial future. The ability to shape your
retirement is in your own hands with the power
of planning.

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hsbc future of-retirement-uk-report

  1. 1. The Future of RetirementThe power of planningUK Insurance Holdings Limited8 Canada SquareLondon E14 5HQ© HSBC Insurance Holdings Limited 2011All Rights Reserved.Excerpts from this report may be used or quoted,provided they are accompanied by the followingattribution: ‘Reproduced with permission fromThe Future of Retirement, published in 2011 byHSBC Insurance Holdings Limited, London.’Published by HSBC Insurance Holdings Limited, LondonDesigned and produced by Global Publishing Services
  2. 2. Foreword IntroductionHSBC’sThe Future of Retirement programme isa world-leading independent study into globalretirement trends. It provides authoritative insightsinto the key issues associated with ageing populationsand increasing life expectancy around the world.The 2011 global report, The power of planning, is thesixth in the series and is based on interviews withmore than 17,000 respondents in 17 countries inDecember 2010.This country report, based on the views of 1,042 UKrespondents, explores how households in the UKare likely to respond to the rapidly changing shape ofretirement over the coming decades. All data used inthis country report relates to the UK unless otherwiseindicated. For further global and regional comparisons,please refer to the global report.Welcome to the sixth Future ofRetirement report, researchedexclusively for HSBC.A lifetime of working is likelyto create a strong appreciationof the value of time and howimportant it is to make the mostof every moment. For manypeople retirement is somethingto look forward to, which they plan in anticipation ofhaving time to do things they’ve dreamed of.At HSBC, we help people to plan financially for theirfuture, both to realise their dreams and to helpthem protect against the bad times whichsometimes threaten.We believe it’s important to ask our customers whatmatters to them and how they feel about the future.This is why we invest inThe Future of Retirement,across 17 countries and 17,000 people.The surveyfindings are the real reflections of people in the UKand across the world.This report lets you see for yourself what othersthink and feel about their retirement. I hope it willalso encourage some readers to take more controlof their own financial future.The ability to shape yourretirement is in your own hands with the powerof planning.DavidWellsHead of Investments, Savingsand InsuranceHSBC BankThe Future of Retirement2 3„„ 56% of Britons see retirement as an age of freedom. Married couples are the most confidentabout this„„ UK respondents are concerned about occupational pensions: 57% of those who expect to beworse off than their parents in retirement gave the reason that company pension schemes wouldbe less generous„„ Only 42% had heard of the new National Employment SavingsTrust (NEST) which will be intro-duced from 2012„„ Men and women of all ages associate retirement with freedom, but women are on average 18%more likely to associate it with financial hardship„„ Only 40% of households have planned financially for their future„„ Nearly one in five people do not know what their main source of retirement income will be„„ Those who have plans for their futures are not only better prepared financially for retirement butalso feel more positive about their futures„„ UK respondents are less likely than their global peers to have a financial plan, but they are morelikely to have taken professional financial advice„„ Those who have financial plans and have taken professional advice are the best prepared of allfor the future, with 250% of the UK average level of retirement savings and investments„„ Independent financial advisers are the most popular source of professional advice in the UK with59% of advice-seekers consulting one; banks were the second-largest„„ Respondents are more active online researchers than the worldwide average, with 45% in theUK using this advice source„„ For individuals who want to take action now to improve their financial well-being later in life,there is a simple 5-step checklist based on the researchKey findings
  3. 3. The Future of Retirement4 5Retirement landscapeThe retirement landscape for the ‘baby-boomer’generation, which is now entering retirement, will bequite different to the one that their parents enjoyedin the past and their grandchildren will experience inthe future.The United Nations Population Divisionreports that in the past 30 years, the process has beenrelatively stable with the percentage of the populationaged 65 and over increasing just slightly from 14.9% in1980 to 16.6 per cent in 2010. However, this is set tochange: by 2050, 22.9% of the population is projectedto be aged 65 and over. This represents a squeezeon those of working age, and on the state, to haveto provide retirement income and healthcare for theageing population. Adequate planning and preparationfor retirement will become more important than everas dependence on retirement savings grows.020406080100%Figure 1:Aged 0-14 Aged 15-64 Aged 65+1980 2010 2050216415176617166123Figure 2:An opportunity for a whole new chapter in lifeA continuation of my current lifestyleAn opportunity to be a more flexible in how I workA time for rest and relaxationThe beginning of the end48%10%23%11%9%Figure 3:Having a strong religious faithHaving work you enjoyHaving ambitions and dreamsContinally trying new thingsAvoiding stressGood financial planningStaying young at heartKeeping fitLoving family and friendsNot having to worry about moneyKeep your mind sharp56735143646370296537120% 10 20 30 40 50 60 70 80Aged 0-14 Aged 15-64 Aged 65+1980 2010 2050216415176617166123Figure 1: The baby-boomers enter retirementSource: United Nations Population Division, World Population Prospects,The 2008 DivisionFigure 2: How people perceive retirementFigure 3: What is extremely important to a happy retirementThe changing shape of retirementFaced with the universal challenge of funding anageing society, Britons remain upbeat in theirperception of retirement.Nearly half (48%) see retirement as a new chapter inlife, and 56% associate retirement with freedom.When considering what constitutes a happyretirement, 70% said not having to worry aboutmoney and 56% see good financial planning asextremely important.38% associate retirement with financial hardship, butthis peaks with women (49%), singles (40%) and thecohabiting (49%).Married Britons appear more secure, with only a third(34%) thinking old age will bring financial hardship and42% seeing it as a time of happiness.With 29% believing that having work you enjoy isextremely important in a happy retirement, it seemsthat UK respondents are adapting to the new reality oflonger, less secure retirements in their willingness toconsider flexible work.The UK has actively sought toencourage longer working lives through increasing theState Pension Age (SPA) from 65 today to 68 by 2043.
  4. 4. Nearly one-quarter of Britons expect to be much worseoff than their parents in retirement.This rises to nearlyone-third of those without a financial plan. Nearly 58%said that this was because the state pension wasas not generous as it used to be, while 63% wereconcerned that their generation had not saved enoughfor retirement.A high number (57%) are concerned that companypensions are not as generous as they once were.Thisis certainly true, given that final salary schemes, whichwere common 30 years ago are now largely extinct.The retirees of tomorrow face a more uncertain future;as a result there is a sense that a golden age haspassed and that the future will hold greater challenges.The Future of Retirement6 7Figure 4:-60-50-40-30-20-100%BetteroffWorseoff1020304050607080FranceUSUKPolandCanadaTaiwanArgentinaSaudiArabiaSingaporeMexicoSouthKoreaHongKongBrazilUAEMalaysiaChinaIndia-56-37-22 -20 -20-41116 172329 31 33 34426269Global average (11)0%10203040506057315849Figure 6:Freedom Financial hardshipMale FemalePeople are living longer and need more savingsState pensions are not asgenerous as they used to beCompany pensions are no longeras generous as they used to beMy generation is not saving enoughJobs and careers are less secureLow interest rates will mean lowerreturns on retirement savingsThe global financial crisis has reducedthe value of my investments and savingsHigher taxis will reducethe value of my retirement plansMy generation has borrowed too much635857514948464442Figure 5:0% 10 20 30 40 50 60 70Figure 4: Better or worse off than your parents’ generation in retirement?(net score)Figure 6: Women associate retirement with financial hardship more than menFigure 5: Why will you be worse off in retirement than your parents’ generation?The shape of retirement is changing rapidly in the UK,as the population ages and the previously generousstate and company benefit schemes become leaner.The financial crisis has exacerbated the ageingissue, increasing public debt and large governmentdeficits leading to cuts in public services. Womenare decidedly less upbeat than men about theirfiscal futures, they are 18% more likely to associateretirement with financial hardship.
  5. 5. Shortfalls in retirement preparednessOur findings reveal a ‘preparedness gap’ amongstrespondents. 93% of those we surveyed claimedhaving enough money to live on in retirement asimportant, but only 60% said they felt adequatelyfinancially prepared.The preparedness gap in the UK isfurther emphasised by how worried people are aboutbeing able to cope financially in retirement: 62% saidthey were either slightly or very worried.The biggest reason why people are concerned aboutcoping financially in retirement is because they don’tthink they will get enough from the state pension.Those admitting that they hadn’t saved enoughconstitute 48% of respondents, and concern isgreatest among women in their 30s and 40s, at 57%,suggesting that younger generations may be comingto accept the shift in responsibility from state to theindividual.Unforeseen events are also unnerving respondents,yet only one-fifth of Britons (21%) feel that their familyis very prepared if something should happen to them,suggesting a lack of asset protection and life insurance.Debt is an issue for many in the UK too, and highlevels of household debt and the high cost of servicingrepayments are a barrier to higher savings both for thelong and short-term.Clearly, there is a need to change current patternsof household behaviour to ensure a comfortableretirement.The new National Employment SavingsTrust (NEST) may help to achieve this, but 57%are not aware of its existence, despite its plannedintroduction in October 2012. Whatever impact thescheme has on UK households, millions of peoplecould benefit further from having a financial plan andseeking professional advice.A worrying finding is that 17% of respondents donot know what their main source of income will be inretirement. Furthermore, 21% of respondents believethat their biggest source of income will be the statepension.The 9% who will be relying on personalpensions is a small minority in comparison, andthese figures need to change if the UK is to be trulyprepared for the future of retirement.igure 7:Slightly worriedVery worriedNot worriedNot thought about itDo not intend to retire20%42%7%1%30%48593641302614 1419Figure 8:0%102030405060I haven’tsavedenoughI don’t thinkI’ll getenough fromthe statepension (e.g.socialsecurity)I won’t getenough frommy workpensionschemeI’m afraidofunforeseeneventsdepletingmy savingsI’m worriedabout thecost ofill-healthI’m worriedthat myinvestmentswon’t per-form wellenoughIll need tosupport mychildren orgrandchil-drenthrougheducationI’mconcernedabout thecost oflooking aftermy parentsin their oldageI have toomuchoutstandingdebtFigure 7: Levels of concern about coping financially in retirementFigure 8: Why people worry about coping financially in retirementThe Future of Retirement8State pension (e.g. social security)Don’t knowDefined contribution pension scheme arranged...Defined benefit pension scheme arranged...Individual personal pension schemeOther savings and investmentsAn inheritanceWages or salary from paid employmentRental incomeSocks and/or shares investmentsSelling your primary residental propetySelling assets tied up in investment propetySupport from children/descendentsSelling assets tied up in business211710109765444211Figure 9:0% 5 10 15 20 25Figure 9: Over-reliance on declining state and company pensions9
  6. 6. The Future of Retirement10 11The power of planningTable 1:The four consumer typesGlobal(% ofglobalrespond-ents)UK(% of UKrespond-ents)Consumer types38% 36%Non-planners: disengaged. These people are doing nothing by way of financial plan-ning or financial advice. There is a complex mix of reasons why they do not make aplan; many believe they lack the necessary household income.12% 25%Non-planners: advice-seekers. These people do not have a financial plan, though theydo at least take professional financial advice from time to time. They are likely to seekadvice around one particular need, rather than take holistic advice.22% 13%Planners: active self-guided. These people have a financial plan in place but do notseek professional expertise to help them make sense of their finances. They are likelyto be younger, mid-to-high income and internet savvy.28% 26%Planners: advice-seekers. These people have a financial plan in place and also takeprofessional financial advice to help manage their finances. In many respects they arevery well prepared for retirement. They are more likely to be older and wealthier.As we have seen, a greater onus will be put onindividuals to prepare for their own later lives. Currently,financial planning behaviour in the UK falls short of theglobal averages, with only 39% of UK respondentshaving financial plans in place, compared to 50% onaverage world-wide. However UK respondents aremore likely to opt for professional financial adviceinstead, with Britons twice as likely as the globalaverage to take financial advice without a plan.Thisfinding suggests a tendency for the British to shiftresponsibility for their financial concerns about thefuture to professionals.The group who most embraced financial planning areyoung men (aged 30-39), 46% of whom did so.Thissuggests, amongst men at least, a generational shiftin attitudes towards planning, as younger people seethat they are facing a long retirement with less state orcompany pension provision than their parents.Figure 10:0%1020304050% Planners40463438 3937 3740AllMalesAllFemalesMale30-39Male40-49Male50-59Female30-39Female40-49Female50-59Figure 10: Younger men more likely to have a financial planThe planning premiumOur findings reveal that those with a financial plan forthe future enjoy several benefits over those who donot – the ‘planning premium’ - and that these benefitsare both ‘hard’ and ‘soft’, including not only greaterand more diverse retirement savings, but also a morepositive outlook and fewer worries about later life.Respondents who undertook financial planning weremore likely than non-planners to associate retirementwith positive ideas such as freedom and less likelyto associate it with negative ones such as financialhardship. Although it is difficult to separate causeand effect, these findings hold true across all ageand income ranges. Whilst these benefits may seemobvious, the extent to which they are present in ourfindings indicates a significant ‘soft’ benefit of planningfor the future today; those with a plan have fewersources of worry and stress.When we look at the retirement savings andinvestment levels of our respondents, we see thatthose with financial plans have over four times (433%)as much as non-planners.This shows that thereis a strong planning premium in the UK in hardfinancial terms.Figure 11:0%10203040506070807050 4928492747233220311628131651522151412201523183018352348FreedomHappinessOpportunitySatisfactionWisdomExcitementHopeWealthLonelinessDiscriminationFearLossofmemoryBoredomPoorhealthFinancialhardshipPlanners Non plannersFigure 11:0%10203040506070807050 4928492747233220311628131651522151412201523183018352348FreedomHappinessOpportunitySatisfactionWisdomExcitementHopeWealthLonelinessDiscriminationFearLossofmemoryBoredomPoorhealthFinancialhardshipPlanners Non plannersFigure 11: Retirement associations of planners and non-plannersUKaverageNon-planners:disengagedNon-planners:adviceseekersPlanners:activeself-guidedPlanners:advice-seekersAllnon-plannersAllplannersTotal retire-ment savingsand invest-ments (house-hold median)£(GBP), tonearest ‘00053,000 14,000 42,000 123,000 132,000 28,000 123,000% of globalaverage100% 26% 79% 232% 249% 53% 232%Table 2: Planners have more retirement savings and investmentsThese figures are calculated using median data, which can produce the same results in different categories
  7. 7. The Future of Retirement12 13The advice advantageThose who have a financial plan in place and soughtprofessional advice are the best off financially, withthe largest retirement assets of all four consumertypes.This reveals a further benefit for those whocombine financial planning with professional advice –the ‘advice advantage’. Advice-seeking planners havenearly two-and-a-half times (249%) more retirementassets than the UK average. Whilst it is difficult toseparate cause and effect, these findings also holdtrue when controlling for age and income.Those who sought professional financial adviceshowed a preference for independent advice channelswith 59% having visited an independent financialadviser, with banks the second most popular sourceof advice. Newer sources of advice such as onlineresearch are used significantly more in the UK thanelsewhere globally.The benefits of planning, especially when combinedwith professional advice, that our research has shownsuggests that whilst the UK faces a challenge over thecoming decades in funding retirement, a wider cultureof financial planning would be beneficial to bothindividuals and the economy as a whole.Britons are on the whole relatively upbeat aboutretirement, particularly married couples and thoseon higher incomes, whereas women and thoseclosest to retirement find themselves feeling mostapprehensive.At the same time there is widespread concern thatthey will not be able to afford the sort of retirementcurrently being enjoyed by their parents’ generation.Such fears have been brought to a head by the impactof the financial crisis, which is forcing the UK to cometo terms with structural problems in its pensionssystem.The government is embarking on reforms thatwill raise pension ages more rapidly than previouslyplanned with the state pension age for men set toincrease from 65 to 66 years as soon as 2016.Large numbers of Britons are doing nothing about theshortfalls in provision to come, though the possibleintroduction of a universal state pension by thecoalition government should make the state pensioneasier to understand.This could make it simpler toconvince UK households to take steps towards savingfor their own retirement.For individuals and households who want to takeaction now to improve their financial well-being in laterlife, we have devised a simple 5-step checklist basedon the research:1. Establish some clear goals,both short and long term2. Benchmark yourself3. Establish a comprehensive financial plan4. Implement the plan5. Keep your plan under reviewFurther details on the 5-step process can be foundat the end ofThe Future of Retirement The power ofplanning global report.Conclusion
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