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8/13/2019 HSBC Study on Retirement
1/56The Future of Retirement Foreword1
The Future of RetirementThe power of planning
Global Report
8/13/2019 HSBC Study on Retirement
2/56
Photography
The photographs
of navigation tools(compasses, maps, plans)
and modes of transport
(walking, cycling, driving,
sailing, train, flying) used
in this report were chosen
to illustrate its key theme
the power of planning
to help guide us on our
journey through life.
The Future of RetirementThe power of planning
8/13/2019 HSBC Study on Retirement
3/56
Contents
Foreword 4
Introduction 4
The research 5
Executive Summary 6
Part OneThe changing shape of retirement 10
Not the beginning of the end but
a whole new chapter in life 12
Reality dawns for those nearing retirement,
but is it too little too late? 13
A new approach to working in later life? 14
Other important lifestyle changes 14
The death of your parents retirement
and the emergence of an East-West divide 15
The loss of entitlement and
growing unease in the West 16
The growing optimism in the East 19
The changing role of family
in funding retirement 20
What impact will changing family structureshave on high savings rates in Asia? 20
Case study: The joint family system in India 21
Part TwoShortfalls in retirement preparedness 22
How well prepared are people for retirement,
and where are the gaps? 24
Who will fund the retirement of the future? 26
Mandatory savings schemes 27
Case study: 2012 and the UK National
Employment Savings Trust (NEST) 27
The need to redefine aspirations
for retirement age 28
Part ThreeMaking the most of the planning premium 32
The continuing financial advice
and planning gap 34
Profiles of different consumer types:
planners and advice seekers 35
The planning premium: the softer benefits 38
The planning premium: the hard benefits 39
The advice advantage 40
Harnessing the power of planning 42
The role for the financial services industry 44
The role for individual households 46
Building a financial plan:Five practical steps 48
ConclusionsSupporting households
in planning for retirement. 50
The planning premium:
the benefits of financial planning 50
The need to change household
savings behaviour 51
The importance of working beyond
current retirement ages 51
Appendix 52
3
8/13/2019 HSBC Study on Retirement
4/56The Future of Retirement Foreword4
It is my pleasure to introduce the latest in our series
of global studies into the Future of Retirement. The
power of planningis our sixth report and the most
action oriented to date.
A key tenet of HSBCs strategy is to anticipate,understand and act upon global macro trends. One of
these trends is the ageing of the worlds population
and the concurrent increase in life expectancy.
Addressing the challenges and opportunities of
ageing populations and longer lifespans will require
concerted effort by governments, employers, financial
institutions and, of course, families and individuals
themselves.
We look forward to embracing this opportunity and
want to contribute to the success of our customers
and society in meeting the challenge of an ageing
society. We are reshaping our business worldwide
to better help our customers meet their growing
and increasingly complex financial needs. We value
the insights gained from The Future of Retirement
research and are pleased to share the report publicly
to prompt further debate and action globally.
The power of planningis this years central message.
In recognising the combined benefits of having a
financial plan and seeking professional financial
advice, it adds a critical element to the Future of
Retirement series, moving beyond identifying the
issues and challenges and looking to provide points of
action towards a better retirement.
Plans without actions are less effective, so we
also need to understand the challenges in getting
individuals not just to plan, but also to take action on
these plans so that households can expect the best
outcomes in later life.
Working with our research partners, Cicero
Consulting, we have produced a report that we hope
can help households realise the power of planning to
improve their finances now and later in life. We are
pleased to present The Future of Retirement
The power of planning.
David FriedGroup General Manager andGroup Head of Insurance, HSBC
This years Future of Retirement report The power of
planning explores a number of emerging themes in
retirement and financial planning.
Firstly, we see how perceptions of retirement are
changing and what it means for working patterns,leisure and living arrangements. These changes reflect
not only demographic trends but also the recent
economic developments; post-financial crisis, there
is a divergence between the Western industrialised
nations and the emerging economies in Asia as to
how and, indeed whether, households should plan for
their retirement.
Secondly, the issue of who funds retirement
and the continued shortfall in retirement savings
remains a global concern. The recent global
economic downturn has undermined efforts to
meet the growing need to save for retirement. As
governments reduce the scope of entitlements
under state pension systems, households are
struggling to fill the gap. Furthermore, households
do not seem willing to work much beyond current
retirement ages. This places even greater emphasis
on the need to save more.
Finally, we see how households clearly benefit by
planning for their retirement the planning premium.
While there are many obstacles to saving for the
long term, efforts are required, through government
schemes to encourage financial education and
industry marketing campaigns, to encourage greater
personal responsibility.
We all have a responsibility not just to ourselves and
our families, but to the wider society to make sure
that we do not become financially dependent upon
either the state or others during our retirement.
Unleashing the power of financial planning is the
critical ingredient in achieving a successful retirement.
Mark TwiggDirector, Cicero Consulting
Foreword by HSBC Introduction from the author
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The research
HSBCs The Future of Retirement programme
is a world-leading independent study into global
retirement trends. It provides authoritative insights
into the key issues associated with ageing
populations and increasing life expectancy around the
world. Since The Future of Retirement programmebegan in 2005, more than 110,000 people worldwide
have been surveyed.
The 2011 report, The power of planning, is the sixth in
the series and is based on interviews with more than
17,000 people in 17 countries:
Argentina
Brazil
Canada
China
France
Hong Kong
India
Malaysia
Mexico
Poland
Saudi Arabia
Singapore
South Korea
Taiwan
United Arab Emirates
United Kingdom
United States
The report surveyed financial trendsetters of working
age (mostly between 30 and 60 years old) who tend
to be more educated than average, live in urban
areas and have greater access to the internet. Those
in emerging economies tend to share the same
attitudes and behaviour as those in the developed
world, including attitudes towards retirement
planning. The survey was conducted online in
December 2010 and some data was collected on
both a household and individual basis.
With the worlds population of over 65s set to
increase from 550 million today to over 1.4 billion by
2050,ithe need to better understand the financial
consequences of this demographic macro trend
demonstrates the continuing importance of The
Future of Retirement. Both Europe and North Americaare reaching a critical stage as the first cohorts of
baby boomers now approaching retirement and in
Europe this will see the working-age population start
to shrink from 2012 onwardsii. As a result, the elderly
dependency ratio will double: where at present there
are currently four people of working age for every
person over 65, by 2060 there will be just two people
of working age for every person over 65iii. The sums
involved in addressing this trend mean that ageing
demographics ranks alongside climate change as one
of the major challenges facing the world during the
21st century.
In this report, we seek to discover how this ageing
trend is viewed at the household level and provide
some pointers for individuals to improve their
retirement situation. The report is structured into
three main parts. In part 1, the report looks at the
fundamental attitudes to retirement; do people feel
generally positive or negative towards the concept
of retirement? In part 2, the report looks at how
these attitudes are impacting on peoples sense of
preparedness for retirement. In part 3, the report
focuses on how consumers can enjoy a financial
planning premium demonstrating how professional
financial advice and financial planning can make a
significant difference.
5
8/13/2019 HSBC Study on Retirement
6/56The Future of Retirement Executive Summary6
Executive Summary
The power of planning
41%41% felt that they were under-prepared for retirement to some
extent, while 64% admitted to being concerned that they would notbe able to cope financially in retirement.
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The Future of Retirement The power of planning
shows that the perception of retirement is changing.
Around half of our respondents view retirementas an age with largely positive associations, a time
of happiness, satisfaction and freedom. However,
retirement also carries with it negative connotations,
with one-third expressing fears about potential
financial hardship. This fear of financial hardship is
much more pronounced among those rapidly nearing
retirement age: reality dawns for those in their 50s
whose plans are likely to fall short.
The emergence of a major East-West dividein retirement perceptions
Not all countries view retirement through the same
prism: different countries and regions have different
perspectives. The factors which are driving the
positive mindset seem to be closely associatedwith the benign economic conditions andgrowing wealth in the emerging marketswhere,even during the financial crisis and recent global
economic downturn, there has been continued
growth in GDP, fuelling rising household incomes and
an increased ability to undertake a strong savings
habit. For example, Chinese households currently
save the equivalent of 38% of their GDP, while in
India the figure is 35%. This compares with 3.9% in
the USiv. Respondents in countries such as China and
India are consequently among the least concernedby potential financial hardship in retirement. In
South Korea however, we have seen a rapid decline
in household savings as a proportion of household
income to levels which now lag behind even many
western countriesv, which may help to explain why
South Koreans are generally more negative about
retirement than their Asian peers. At the same time
as boosting savings rates, this continued economic
growth is also driving inflation, which could explain
the less risk-averse investment appetite in emerging
markets.
The continuing role of the family
in funding retirement
For now at least, people in most emerging markets,
and particularly in Asia, take a positive view in
which rising household incomes today are equated
with greater financial independence in retirement.
Interestingly, this does not necessarily herald a rapid
demise in the important role played by extended
families: in our case study, we examined attitudes in
India where over 80% of respondents claimed that
family would remain important in funding retirement
while one-third said that they intended to live with
extended family members during their retirement.Nonetheless, growing levels of household wealth and
access to long-term savings assets in the emerging
markets will make elderly dependency
a less prominent feature of retirement over the
coming decades.
The baby boomer legacy: the deathof the traditional retirement
In sharp contrast to the emerging markets,
respondents in mature markets, where governments
and employers are currently seeking to limit
long-standing pension entitlements, see a less
positive outlook, with many respondents now
concerned that falling household incomes (ratherthan caring for elderly relatives) will leave themworse off in retirement than their parents. Wherewe do find people in the West with a positive
mindset, these people are concentrated in high
income households. This heralds the major and
undesirable development of a breakdown in the
unwritten contract between todays retirees and
the next generation of retirees, which in turn raises
the question of intergenerational equity: what kind
of retirement legacy will the next generation inherit
and is it a legacy which people can be reasonably
expected to adapt to? While people are expected tosave (and invest) more for their own retirements, we
see that 60% of those with no financial plan in place
claim that they lack the money to do so. Meanwhile,
the growing uncertainty post-financial crisis has
already left shell-shocked investors heavily risk-averse,
particularly in the West.
Will the East-West divide persist over time?
It is interesting to note that the behaviour of financial
trendsetters in emerging markets is starting to
catch up with the West: burgeoning debt levels
in the East, for example, are seen as an obstacle
to saving for retirement. Growing affluence inthe emerging markets is likely to result in higher
household consumption and possibly greater levels of
borrowing, lower savings ratios and a general shift in
household priorities away from deferred to immediate
gratification. This trend can already be seen in those
Asian markets such as South Korea and Japan which
were in the vanguard of rapid economic development
in the latter half of the twentieth century.
7
8/13/2019 HSBC Study on Retirement
8/56The Future of Retirement Executive Summary8
There are major global shortfalls in retirementpreparedness
41% of our survey felt that they were under-preparedfor retirement to some extent, while64% admitted to being concerned that they would
not be able to cope financially in retirement. The
findings reveal that women aged between 50 and60 (those who are now of pre-retirement age) are
likely to experience the greatest challenges in funding
retirement. In total, one in five respondents did notknow what their main source of income wouldbe in retirement. Only 16% thought it would comefrom the state pension system and only 10% from
employer pension schemes.
Will people just keep working into old age?
Although one-third believe that work will play a
role in enjoying a happy retirement and 9% expect
paid employment to provide their main source of
retirement income, it seems attitudes to retirement
age are inflexible; most people expect to retire at a
similar age to the current pensionable age. Even in
countries such as France, where the issue of working
longer has become highly provocative, there is little
expectation that people will have to work longer. In
addition, semi-retirement is seen primarily as a route
to early retirement rather than working longer. This
will place even greater emphasis on the need for
individuals to save for their retirement.
The power of planning
What emerges strongly from the findings are the veryreal benefits of financial planning: respondents who
have a financial plan in place enjoy a clear planningpremiumwith hard financial benefits. Not only dothey hold a much broader range of retirement and
non-retirement assets than those who do not have
a plan, they also amass a significantly higher value
of assets; on average planners have amassednearly two-and-a-half times (245%) more in theirretirement plans compared to non-planners, andover three times more (319%) in non-retirementassets.
Alongside these quantifiable financial benefits, these
planners enjoy soft benefits such as a much morepositive outlook towards later life, and they worry less
about coping financially in retirement.
Given the demonstrable positives of planning, anencouraging picture emerges among youngerrespondents, with relatively high numbersundertaking financial planning and at earlier ages
than previous generations. We also find that younger
women are more engaged than those in their
50s, demonstrating positive long-term changes in
household behaviour among women.
Alongside the planning premium, our findings show
a clear advice advantage for those who seekprofessional financial advice. In general,
advice-seekers amass greater levels of financial
wealth than non-advice seekers.
Those people with a plan who have taken professional
financial advice enjoy the benefits of not only the
broadest range, but also the highest value of financial
assets. On average, those who take advice and have
financial plans have amassed over three-and-a-halftimes (357%) the retirement assets and over fivetimes (518%) the non-retirement assetsof thosewho do neither. Combining planning and advice yields
the best results.
Key barriers to financial planning and advice
The barriers to enjoying the benefits of financial
planning and advice are clearly linked. Across the
globe we find that there is a 50:50 splitbetweenthose who are undertaking a financial plan versus
those who do not. Not having enough money is seen
as a key stumbling block to undertaking a plan: 60%of those who do not have a plan blame this on
not having enough money. Lack of time is also animportant factor (15%), particularly for those in higherincome groups who are likely to find themselves
in demanding careers which leave them cash-rich
but also time-poor. Not knowing how to go about it
(23%) and not thinking it would be useful (15%) are
also factors.
Not surprisingly, many people appreciate financial
advice which is suited to their increasingly busy
lifestyles: 41% said that a financial advice sessionshould last no longer than 30 minutes and shouldfocus on their immediate needs. Reassuringly, those
with financial plans in place generally review them on
a regular basis.
The Future of Retirement Executive Summary8
On average planners have amassed nearly two-and-a-half times(245%) more in their retirement plans compared to non-planners,and over three times more (319%) in non-retirement assets.245%
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While taking professional financial advice is often
an essential part of the consumer journey towards
becoming a planner, we find that one in three who
sought financial advice failed to then act on that
advice. The problem of procrastination is more
pressing among couples where the financial
decision-making is shared. When couples make
household financial decisions together, only 41%act on professional advice, compared to nearlyhalf of single decision-maker households.
Steps towards better financial planning
A key challenge in encouraging households to start
planning remains the need to raise basic levels of
financial literacy. We find that half of the worlds
respondents feel that they have only basic levels of
financial understanding. Such a lack of awareness
forms a major barrier to taking action as these
individuals are more likely to procrastinate: one in
five of those who do not seek financial advice said
that they do not know how to find a good adviser
while one in ten said it was because they do not
understand financial advice.
The role of the Internet adds a fast-changing
dimension to this picture. Younger age groups are
more engaged with financial planning through
online channels while professional financial advice
is more concentrated among those in their 50s. This
generational shift in how people access financial
information is likely to have a long-term impact on
how people manage their personal finances, aswell as how people interact with financial services
providers.
Like retirement itself, the concept of financial advice
needs to be redefined to meet the challenges.
The financial advice model of the future should
acknowledge and take account of the consumers
preference for advice sessions that are short, easy to
understand and focussed on immediate needs.
As the onus shifts towards the individual taking
responsibility for their own retirement provision,
we have identified five steps that individuals can
undertake to build a more comfortable retirement.
This starts with establishing clear goals and
benchmarking through to developing
a comprehensive financial plan, implementing it and
reviewing it on a regular basis.
9
50%50% did not have a financial plan.
8/13/2019 HSBC Study on Retirement
10/56The Future of Retirement Part One10
People have a generally positive image of retirement, with
nearly half (48%) associating retirement with freedom.
48%
Part One
The changing shape of retirement
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Retirement is not seen as the beginning of the end but as a new chapter in life. People
have a generally positive image of retirement with nearly half (48%) associating retirement
with freedom
Making the most of this freedom no longer requires people to stop working altogether. 36% thinkthat having work they enjoyed was extremely important to having a happy retirement. This was
much more common in Asia and the Middle East, peaking at 54% of those in Saudi Arabia
The death of the traditional retirement means different things in different parts of the world,
with an emerging East-West divide revealed in retirement attitudes
In the West, people believe that their parents are living a golden age of retirement and large
numbers of people in North America and Europe expect to be worse off in retirement than their
parents, peaking with France where 69% felt their retirement would be worse than their parents,
and only 13% felt they would be better off
This fear is largely driven by the decline of state and defined benefit employer-sponsored
pensions. Of those British respondents who think they will be worse off than their parents,57% blame the lack of company pension schemes
Among those people worrying that they will not be able to cope financially in retirement, there
are marked differences between respondents in Asia and those in the West
Asian respondents worry that their savings will be depleted by unforeseen events and overone-quarter are concerned about the cost of looking after their parents in old age. The role of the
family in funding retirement is a much bigger issue in Asia
Respondents in the West are more likely to fear the increasing burden of debt. Westerners
also reveal a greater fear of investment risk choosing to be much more conservative in their
investment approach
Latin America displays unique characteristics. While the region is similar to other emerging
markets in terms of economic development and household income levels, we find that culturally
Latin America has more in common with the West
Key findings
Dont simply retire from something;
have something to retire to.Harry Emerson Fosdick
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12/56The Future of Retirement Part One12
The 2011 findings show a high degree of consistency
with the Future of Retirement reports of previous
yearsvi. The demographic trend placing most countries
on the path towards ever increasing life expectancy
is now well understood. In fact, our research revealed
that it is in those countries which are ageing most
rapidly where we found the greatest retirement fears.
In effect, there is a direct link between a societyscurrent life expectancy and the fear of longevity,
suggesting that people are far more aware of the
looming demographic time bomb than is often
assumed. If people are beginning to grasp that
retirement is set to change, then the key questions
are: how do people feel about the future of retirement,
and what factors are influencing the way people think?
Not the beginning of the endbut a whole new chapter in life
Attitudes to retirement are generally positive. Far from
being seen as the beginning of the end, the prospect
of having a long retirement is thought of as a whole
new chapter in life and a period of big lifestyle changes
affecting not only working patterns, but also livingarrangements and health.
While there is a general sense that retirement is
an age of freedom (Figure 1), this view is moreprominent in many (though not all) Asiansocieties. In addition, while it is clear that in the Eastfreedom and work go together in retirement, freedom
in the West is defined more narrowly as being
freedom from work.
48
35
33
25
25
20
19
19
Freedom
Happiness
Satisfaction
Opportunity
Wisdom
Wealth
Hope
Excitement
Discrimination
Loss of memory
Fear
Loneliness
Boredom
Poor health
Financial hardship
9
13
16
19
22
29
32
0 10 20
%
30 40 50
Figure 1:Positive perceptions of retirement predominate
Q. Which of the following do you associate with retirement?
Base: All respondents, multiple responses allowed
Overall, we see that the yellow bars (which show
positive associations) rated higher in peoples
mindsets than the blue bars (which show negative
associations)
The single most popular response associated with
retirement was freedom, chosen by 48%. Other
positive associations such as satisfaction (33%)
and happiness (35%) were also rated highly
However, many people see retirement as
a time of financial hardship (32%) and potentially
poor health (29%) revealing that while people
are naturally upbeat about retirement, they do
understand that there are potential risks to be
managed
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13/5613
Reality dawns for those nearing retirement,but is it too little too late?
The fact that financial risks are present in retirement
dawns increasingly on people as they near
retirement. We see that the older age groups (thoseaged over 50) are likely to be much less confident
about retirement.
At some point during a persons 40s and 50s, the
reality dawns that they havent done enough in terms
of thinking about and planning for their retirement.
Currently, most people respond to this reality by
deferring their expected retirement age. In future,
one of the key challenges facing employers,
governments and financial institutions is how to
encourage individuals to act earlier in life so as to enjoy
a more positive financial outcome.
30-39 year olds 40-49 year olds 50-59 year olds
31
25
3540
1712
20
30
40
10
0
%
The reality of
retirement strikes
Optimism wanes
with age
Wealth
Financial hardship
Figure 2: Reality dawns for those nearing retirement
Q. Which of the following do you associate with retirement?
Base: All respondents, multiple responses allowed
It is clear from Figure 2 that there is a significant
relationship between a persons age and their
perception of financial well-being in retirement.
As people near the onset of retirement, their
perceptions of what they can expect to experiencegrow increasingly negative
While a quarter of those aged 30-39 (25%)
associated retirement with a time of wealth,
31% associate retirement with financial hardship,
representing a net score of minus 6%for the
optimists. However, among those aged 50-59,this net score falls to minus 28%with just 12%associating retirement with wealth
As people near retirement,
their perceptions of what they
can expect to experience grow
increasingly negative.
8/13/2019 HSBC Study on Retirement
14/56The Future of Retirement Part One14
Asian respondents are much more likely to see
having work you enjoy as being extremely important
to achieving a happy retirement (Figure 3)
North Americans are generally more flexible to
the idea of working in retirement than European
respondents
Within Europe, only 5% of respondents in France
see retirement as an opportunity to be flexible
in how they work while only 14% think that work
will be important for achieving a happy retirement,
whereas twice as many UK respondents
thought this
France
Poland
UK
Canada
US
Brazil
Mexico
Argentina
SaudiArabia
UAE
HongKong
SouthKorea
Taiwan
Singapore
India
China
Malaysia
0
10
20
30
40
50
29
45
26 29
20 22
3933
47
19
29
36 39
45 46 46
27
Global average (34)
%
Europe North
America
Latin
America
AsiaMiddle
East
Other important lifestyle changes
Interesting attitudes to other important lifestylechanges also emerge in the findings. In particular,
there is a widespread fear that ill-health will come
to play a significant role on peoples finances in
retirement.
Globally, one-third of respondents expect there to
be a very significant impact of ill-health on their
finances. This rose to 74% when including those
who expect health to have quite an impact
This concern over ill-health is greatest in Hong Kong
and Singapore (both 87%)
In countries that lack a universal healthcare system,
this fear is not just the cost of treating themselves
in the longer term but also the medical expense of
treating their parents in the shorter term
As we see later, the fear of ill-health is not reflected
in peoples financial plans: only 40% of those with
a financial plan currently have medical expensesinsurance
We also anticipate important changes to retirement
living arrangements. With less than half of our global
respondents feeling that retirement is a time of
continuity, we find that:
Only one-third (34%) of respondents globally want
to live out their retirement in their current home
Higher income groups are almost twice as likely
as lower income groups to aspire to splitting their
time between their main home and a second
property
Lower income groups are almost twice as likely
as higher income groups to want to live with their
children and have family members close at hand
Figure 3: Enjoyable work, enjoyable retirement?
Q. Which of the following do you think are extremely important to achieve a happy retirement?
A. Having work you enjoy
Base: All respondents, multiple responses allowed
A new approach to working in later life?
The potential shortfall in peoples retirement
preparedness is again evident in our research,
which suggests that people already understand that
increasing longevity will put pressure on them to work
longer. Longevity is increasing the need to save, faster
than household budgets can accommodate that need.
Even in countries with high savings ratios, the feeling
that people are still not saving enough for retirement is
apparent. Naturally, this raises the prospect of having
to work beyond current retirement ages. In many parts
of the world the prospect of being flexible in their
approach to work is a positive, with work seen as an
ingredient to a happy retirement.
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The death of your parents retirement and theemergence of an East-West divide
Underpinning the attitudes expressed above, it is clear
that few of our respondents expect to havea similar experience of retirement to their parents.The concept of a traditional retirement appears
to be eroding. But, what is considered traditionalis very different depending on where in the world
respondents live.
In the West, retirement has been associated with
entitlement to generous pension benefits whereas
in the East it has been associated with a sense of
responsibility to the older generation, who have often
found themselves financially dependent on younger
relatives. That both these traditions are expected to
diminish over time is producing a bipolar world - when
it comes to perceptions of the future of retirement.
People in the West are concerned at the passing of the
traditional retirement; people in the East in the main
are more upbeat and confident about their prospects.
Latin America does not fit neatly into either camp: on
certain economic issues (such as attitudes to financial
hardship), respondents behave like other emerging
markets, while on more cultural issues (such as
attitudes to risk), they are aligned much more closely
with the views of the Western economies.
Respondents in all of our North American and
European countries are more likely than the global
average to see retirement as a time of financial
hardship. Most of the emerging markets take a
less gloomy view of retirement
A notable exception is Argentina, where
government reforms in November 2008 led to
the nationalisation of USD23bn of the countrys
private pension funds. This followed a 20% fall
in the value of Argentinean pension funds at the
outset of the global financial crisisvii. These events
seem to have shaken confidence in retirement.
However, Mexico and Brazil fall into line with the
emerging markets rather than the mature markets
South Korea, which has seen a large drop in
household savings ratios in recent years, does
not fit the pattern displayed in the other Asian
economies and respondents there are much less
optimistic about how to fund retirement
Europe North
America
Latin
America Asia
Middle
East
Poland
France
UK
C
anada
US
Arg
entina
M
exico
Brazil
Saudi
Arabia
UAE
South
Korea
Taiwan
HongKong
Singapore
M
alaysia
India
China
18
42
17
31
52
353938
20
31
25 23
17
55
30
26
45
Global average (32)
10
20
30
40
50
0
%
Figure 4: Financial hardship in retirement expected by those in ageing economies
Q. Which of the following do you associate with retirement? A. Financial hardship
Base: All respondents, multiple responses allowed
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16/56The Future of Retirement Part One16
The loss of entitlementand growing unease in the West
One of the central choices facing mature markets is
how to reform entitlements in old age.
The sustainability of pension systems was already
in doubt given the ageing global demographics.
However, the financial crisis brought matters to a
head.
For respondents in the West, traditional retirement,
with its positive notions of early retirement, giving
up working completely at the age of 60 (or possibly
earlier), and enjoying the financial security afforded by
a relatively generous state pension and possibly an
employer-sponsored final salary pension scheme, is in
demise. In its place, younger generations of workers
are being told to save more for their own retirement
while being expected to work up to five years or
longer than their parents.
To some extent these younger generations are the
victims of their parents success. The baby boomer
generation which grew up after 1945 has enjoyed
the best of all worlds stable employment markets
typified by the job for life culture, long-term stability in
investment markets and a favourable property market,
as well as generous state and employer-sponsored
pension arrangements. However, the retirement of
this generation is now tipping the balance between
working age taxpayers and the retirement population.
Whereas the dependency ratio (the number of
workers compared to the number of retirees) is
around 4:1 today, it will drop to 2:1 by the middle of
this century. In other words, what the baby boomer
generation came to take for granted is no longer
affordable.
The loss of such benefits helps to explain the concerns
shared by large numbers of respondents in North
America and Europe where we see a generationof workers who think that they will be poorerin retirement than their parents(Figure 5). Oneof the basic principles of any retirement system is
that it is seen to produce fair outcomes between
each generation of workers and retirees, and it is
implicit in this contract that each generation should
not be left worse off than the one which preceded
it. However, our findings reveal that this so-called
inter generational contractxiseems now to be
fundamentally broken in the industrialised countries.
Efforts have been made in 2010 by many
countries to reduce the cost of state pension
benefits and encourage deferring of retirement
notably in Greece (where state pensions
currently replace up to 90% of working age
incomes) and France, both of which experienced
social unrest as a result
The UK, which has already committed itself to
increasing the state pension age from 65 today
to 68 by 2043, was required, as a result of its
deficit reduction programme, to bring forward
the start of the planned increase in retirement
age to 2016 from 2020viii
The European Commission is looking at ways to
improve both the sustainability and adequacy of
pension systems across Europe. Sustainability
in this context could be interpreted as a byword
for reducing state pension benefits over the long-
termix
In the US, the Presidents Deficit Commission
has made clear that the need to move towards
a balanced fiscal budget will require entitlement
reform, including healthcare reforms which will
hit future generations of retireesx
The financial crisis and pension reform in the West:
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Respondents in North America and Europe think
that their parents are enjoying a golden age of
retirement which will not be repeated when
they come to retire. France, for example, has a
net score of minus 56% of those who expect
to be better off in retirement than their parents,
compared with India which has a net score of plus69% (Figure 5)
The main drivers behind these concerns also
reveal why it is that Western respondents are
particularly gloomy, with the erosion of traditional
types of pension those provided through the
state and employers being a key concern in
developed markets (Figures 6 & 7)
-60
-50
-40
-30
-20
-10
0%
10
20
30
40
50
60
70
80
France US UK
Poland
Canada
Taiwan
Argentina
SaudiArabia
Singapore
Mexico
SouthKorea
HongKong
Brazil
UAE
Malaysia
China
India
-56
-37
-22 -20 -20
-4
11 16 17
2329 31
33 3442
6269
Figure 5: Better or worse off than your parents in retirement? (net score)
Q. Overall, do you think your generation will be better or worse off in retirement compared to your parents
generation?
Base: All respondents, those answering that they would be much or slightlybetter off minus
those answering that they would be slightly or much worse off
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Younger workers are feeling the financial pinch
caused by living their lives in the slipstream of
the post-war baby boomer generation. Unlike
their parents, they will not benefit from generous
final salary pension schemes. This is a particularly
strong concern in the UK where 57% of those
who thought they would be worse off than their
parents cited the erosion of company schemes.This also emerges as a concern in the US (43%)
and Canada (41%) (Figure 6)
Another concern centres on the paring back of
social security schemes as governments seek
to find more fiscally sustainable ways of funding
old age. Again, the UK fares badly on 58% with
Argentina coming top on 59% and France close
behind on 57% (Figure 7)
Europe North
America
Latin
America Asia
Middle
East
UK
Poland
France
US
Canada
Mexico
Argentina
Brazil
SaudiArabia
UAE
India
Singapore
HongKong
Taiwan
China
Malaysia
SouthKorea
26
39
17
40
28
4143
23
34
40
31
19 17
3329 28
57
Global average (34)
10
20
30
40
50
0
%
Europe North
America
Latin
America Asia
Middle
East
UK
France
Poland
US
Canada
Argentina
Mexico
Brazil
SaudiArabia
UAE
China
SouthKorea
HongKong
Singapore
India
Malaysia
Taiwan
44
58
25
59
50515057
34
46
312527
38
2728
56
Global average (45)
10
20
30
40
50
60
0
%
Figure 6: Company pensions expected to be less generous
Q. Why do you think your generation will be worse off in retirement?
A. Because company pensions are no longer as generous as they used to be
Figure 7: State pensions expected to be less generous
Q. Why do you think your generation will be worse off in retirement?
A. Because state pensions (eg social security) are not as generous as they used to be
Base: Respondents answering that they would be slightly or much worse off
than their parents in retirement, multiple responses allowed
Base: Respondents answering that they would be slightly or much worse off
than their parents in retirement, multiple responses allowed
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What we are seeing now is the very real downside of
what has been referred to as the great risk shift in
which societys response to increasing life expectancy
is to expect the younger generations to shoulder the
savings and investment risk burdenxii. Our findings
illustrate that todays workers in the industrial countries
of the West have already acknowledged that a major
transfer of risk is taking place and are concerned aboutits implications.
The growing optimism in the East
In the emerging markets of Asia and the Middle East,
the death of the traditional retirement is producing
a very different picture. We see the traditional
dependency in old age being transformed into
greater financial self-reliance, fuelled by the rapid
improvements in household incomes and living
standards. For example, in just five years, Indias per
capita gross national income rose by a staggering
87% from USD630 in 2004 to USD1,180xiii. While still
low compared by international standards, peoples lifechances are being rapidly improved in India as in other
emerging markets, which filters through into a more
confident and optimistic view of retirement. This helps
to explain why people in the Asian markets aremore likely to see retirement as a time of freedom (Figure 8).
As an extension of this greater optimism and
confidence about retirement,Asian respondents alsodemonstrate much greater confidence in terms oftheir risk appetite;in comparison, respondents in theWest are relatively risk-averse.
Globally, 31% regard themselves as being
conservative being prepared to forego higher
returns to safeguard their capital
The number of conservative investors is notablyhigher in Western countries, peaking in France at
51%. This falls to just 12% of respondents in China
and 18% in India
While household incomes in Latin American
countries have more in common with Asia, we find
respondents in Latin America display risk attitudes
more closely aligned with the West. For example,
the number of conservative investors in Mexico is
comparable to the UK, and three times greater than
in China
It is in parts of Asia where the sense of freedom
is most commonly associated with retirement:
Malaysia on 69% ranked first in our survey,
followed by China (67%) and Taiwan (60%)
While our Western respondents may see
retirement as an age of freedom, this freedom
is defined more narrowly as freedom from
having to work, which may well turn out to be
rather limited given the likely reforms beingimplemented post-financial crisis
Europe North
America
Latin
America Asia
Middle
East
Poland
France
UK
US
C
anada
Brazil
M
exico
Arg
entina
Saudi
Arabia
UAE
South
Korea
HongKong
India
Singapore
Taiwan
China
Malaysia
42
58
3329
54 56
28
5347
40
69
60
45
34
67
59
49Global average (48)
0
10
20
30
40
50
60
70
%
Figure 8: Retirement means freedom
Q. Which of the following do you associate with retirement? A. Freedom
Base: All respondents, multiple responses allowed
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The changing role of familyin funding retirement
A particular point of interest regarding Asian
respondents centres on the legacy of the previous
generation of workers and the changing role of the
family. In the industrialised economies, where the
legacy is more likely to be financial, the generation of
baby boomer retirees look set to spend their childrens
inheritance. In emerging markets, the legacy is often
decidedly different. Rather than older family members
leaving financial bequests to their children, children are
expected to provide financial support to their elders.
This arrangement is a source of concern to those
respondents of working age in emerging markets.
What impact will changing family structures haveon high savings rates in Asia?
Much of the additional household income being
generated in emerging markets has been channelled
into high savings ratios. Over one-third of household
income is channelled into savings in India and China.
High savings rates in Asia are not simply a function of
engagement in long-term finances: there is a strong
precautionary motive driven, at least in part, by fears
of the financial strain of looking after other family
members. For example, the one child per family policy
in China has led to fears about financial security in old
age, as it becomes increasingly difficult for the onlychild to support two elderly parentsxiv. This may be one
of the most important factors behind the high savings
ratios witnessed in recent yearsxv. Our research shows
that the burden of looking after elderly relativesis a much greater concern as a potential causeof financial hardship in Asia than elsewhere(Figure 9). In the industrialised economies of North
America and Europe that have highly developed elderly
care services and subsidies, as well as the emerging
markets in Latin America, this fear is much
less pronounced.
North
America
Canada
US
Poland
France
UK
Argentina
Mexico
Brazil
UAE
SaudiArabia
SouthKorea
HongKong
Taiwan
Malaysia
India
Singapore
China
9 10 11
13 14 12
16 16 17 17
13
21
24 24 25
29 29
Europe Latin
America Asia
Middle
East
%
0
5
10
15
20
25
30
Global average (17)
Figure 9: More worry about looking after parents in the East
Q. Which of the following statements describes why you feel worried that you will not be able to cope financially
when you retire? A. Im concerned about the cost of looking after my parents in their old age
Base: Respondents answering that they were very or slightly worried about coping financially
in retirement, multiple responses allowed
Around a quarter of workers in Asia think that
they will struggle to cope financially in retirement
and lay the blame on the need to look after
ageing parents. This view was particularly felt
in Singapore and China where the number of
respondents who felt this way was approaching
one-third (29% in both countries)
These fears are greatest among younger workers
(aged 30-39) who are three times more likely
to worry about looking after their parents in
retirement compared with older age groups
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CASE STUDY The joint family system in India
We asked our respondents in India to assess the
extent to which the traditional family structure
will play a role in future retirement plans. The joint
family system, which sees parents, children and
grandchildren living under one roof, provides Indianswith a safety net that the increasingly strained
social insurance and pension systems of the West
does not. Overwhelmingly our respondents felt that
the joint family system was currently an integral
part of Indian retirement, though this looks likely to
recede over time:
49% ranked it very important with 36% calling
it quite important. This finding held across age
and income groups, with over 80% of high
income Indian respondents seeing the system
as important
Perhaps surprisingly, this feeling of security
was stronger amongst men than women, with
only 11% of the former seeing the system as
not important compared to 20% of the latter.
Given the likelihood that they will outlive their
husbands, women in India are beginning to
worry about the sustainability of the joint family
system in a rapidly developing economy where
families are becoming more geographically
dispersed
32% of Indian respondents expected to spend
their retirement living with relatives - almostdouble the global average
Nevertheless these results show that the
patterns of retirement are changing, even in
traditional societies like India. While it was once
assumed you would live with your children on
retirement, many Indians now think differently,
with two-thirds considering different options
Moreover, respondents worried about the
additional burdens that the joint family system
places on savers, with 25% concerned
about supporting their own parents through
retirement
Global economic and demographic trends are having a
profound effect on peoples attitudes to retirement and
planning for old age, evidenced in the stark differences
in outlook between the different regions of the world.
As we now see in Parts 2 and 3, positive attitudes are
clearly linked to levels of preparedness, where Asian
respondents are the most positive and also more
likely to be planning for retirement. However, many
households are frustrated in their efforts to save by
a number of financial advice and planning obstacles
which in turn lead to shortfalls in long-term savings and
investments.
21
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Part Two
Shortfalls in retirement preparedness
1 in 5Nearly one in five (19%) respondents do not know what theirmain source of income will be in retirement.
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Globally, there is a major dearth of retirement preparedness: 41% of respondents feel poorly
prepared for retirement, with two-thirds expressing a concern that they will not be able to cope
financially in retirement
People acknowledge that they will have to save more, but many feel that they cant fill the
retirement gap: 60% of those with no financial plan claim they dont have the money, while 43%
of those who thought that they would be worse off than their parents in retirement, blame rising
life expectancy and the need to save more
44% of women and 42% of young people feel that they are underprepared when it comes to
having enough money to live on in retirement
In the West people believe that their parents are living a golden age of retirement and large
numbers of people in North America and Europe expect to be worse off in retirement than their
parents, peaking with France where 69% felt their retirement would be worse than their parents,
and only 13% felt they would be better off
Who will provide the retirement of the future? The state pension is expected to remain the biggest
source of retirement income, even though social welfare is being reduced in most countries
Nearly one in five (19%) respondents do not know what their main source of income will be inretirement
Almost one in ten (9%) accept that they will have to keep working, with paid employment
expected to be their main income in retirement. However, reluctance to work much beyond
current state pension ages remains, with semi-retirement seen as a route to early retirement
rather than a way to extend working life
Within the home, men continue to shoulder most of the burden for long-term planning. Wherewomen do control the household finances, they are more concerned with short-term financial
issues such as household budgeting
The question isnt at what age I want
to retire, its at what income.
George Foreman
Key findings
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Given the scale of the macro trends now shaping
retirement attitudes and behaviours, it is clear that our
ability to enjoy a comfortable retirement will be slowly
eroded unless we change our approach to funding old
age. While relying on family or working longer will fill
some of that shortfall, filling the retirement income gap
completely will require increases in peoples savings
for retirement. This is true even of emerging markets,which often have high savings ratios but typically
target those savings on looking after the young (eg
education), rather than funding their own retirementxvi.
Over time, we should expect to see a more balanced
approach to funding retirement based on what the
World Bank calls its multi-pillars modelxvii. Whereas
today many people rely on social security,the firstpillarof pension provision, many more people particularly in the emerging markets have not
yet come to rely on any type of formal pension
savings. Informal support systems, notably the
family, still remain strong, though not as strong as
it once was. While social security systems have in
the past provided a basis for pension systems, the
sustainability of state-funded models is coming under
growing pressure in the face of increasing longevity
and higher dependency ratiosxviii. In some countries,
these pressures are reaching crisis point, creating the
need for people to become increasingly reliant on the
second pillarof provision, employer contributionsmade on the employees behalf, or the third pillarofprovision, individuals making voluntary contributions on
their own behalf. In future, ever more responsibility will
be placed on the individual to plan ahead for their own
retirement.
How well prepared are people for retirement, andwhere are the gaps?
The aspiration among households to respond positively
to this challenge is quite high; we find that having
sufficient money in retirement is a fairly universal
financial goal; 88% of our sample thought this was
very or somewhat important to them (Figure 11). Only
in Mexico (81%), Brazil (60%) and Poland (76%) did we
see the figures fall below the global average. However,
this universal desire does not translate into a universal
sense of preparedness and it is telling that so many
people are still failing to plan for the inevitability of old
age. Most of us are potentially at risk of falling short
on our retirement income needs, but some groups are
more at risk than others.
Our findings reveal there to be a major globalshortfall in retirement preparedness, with41% of our survey feeling underprepared forretirement(Figure 10). Only one-fifth (19%) actually
feel like they are very prepared for later life. 64% ofour sample are concerned that they will not be able
to cope financially in retirement. This rises to 70%
of women aged 50-59 who emerge as our most
concerned group.
While those groups most at risk of falling short
in retirement income are women, the young
and those on low incomes, our findings reveal
that even those on high incomes (defined in our
survey as those earning the equivalent of over
USD100,000 in gross household income per
year) could and should be doing more to plan for
the eventuality of retirement
Where women are actively undertaking financial
planning, this tends to focus more onshort-term financial issuessuch as buildingup short-term savings and taking charge of
household budgeting
In contrast, men are more likely to be engagedin more complicated financial planninginvolving investment portfolios, tax planning and
purchasing investment properties. It is this latter
kind of financial planning which needs to be
broadly expanded across the adult population.
This is potentially starting to occur given the
positive signs of change among younger women
Globally, Americans and Canadians are most
likely to be saving specifically for retirement,
though even here we find that one-third of
respondents did not include retirement savings
in their financial plans and over half did not feel
well prepared
In China, where household savings ratios (the
amount of household income which is saved
as a proportion of GDP) outstrip those in North
America, there is a major preoccupation with
short-term savings, with 63% of Chinese
respondents building up short-term savings,
compared with 45% in the US
Indeed, deposit accounts emerged as theworlds favourite form of retirement savingschosen by 42% of respondents.Therefore,the relatively high levels of household savings
in countries like China might not be invested in
savings products likely to generate the best
long-term investment returns
The retirement preparedness gap
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19%
37%
26%
15%
3%
Somewhat prepared
Very prepared
Not very prepared
Not at all prepared
Not applicable
Figure 10: Nearly half think they are under-prepared for retirement
Q. Look at this statement and score it in terms of how well you are prepared.
A. Having enough money to live on in retirement
Figure 11: The preparedness gap
Q. How important is it to you, and how well prepared are you for the following statement?
A. Having enough money to live on in retirement
Base: All respondents
Base: Respondents answering very important to me and somewhat important to me, and
respondents answering very prepared and somewhat prepared, multiple responses allowed
China
Singapore
Malaysia
Argentina
UK
US
SouthKorea
UAE
Canada
Taiwan
SaudiArabia
France
India
HongKong
Mexico
Poland
Brazil
93
60
87
50
76
42
92
49
91
46
81
52 60
48
94
47
91
59
89
55
87
74
87
72
95
57
95
78
90
51
94
60
92
59
Global average of importance (88)
Global average of
preparedness (56)
Preparedness gap
60
20
0
%
40
80
100
Important Prepared
l l i
l l
In this report, we look at the gap between the
importance of preparing for retirement relative
to an individuals willingness to act and their level
of preparation. Although the majority of people
recognised the importance of the issue,
a considerable gap remains between recognising its
importance and the level of action or preparedness.
Only 19% globally feel very prepared that they will
have enough money to live on in retirement, with
another 37% feeling somewhat prepared (Figure 10)
Those nations with the highest savings ratios also
have the smallest shortfall between those who
see retirement income as being important and
those who actually prepare for it. For example,
Chinas shortfall is just 17% (Figure 11)
In the UK (33%) and the US (43%), we see
large shortfalls. Both countries have experienced
very low savings ratios in recent years; even
turning negative in the UK in 2008 (that is to say
households were spending more than their total
income)xix
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Who will fund the retirement of the future?
Given the likely shortfalls in the levels of retirement
preparedness, a key question emerges: how will
people source their retirement income in future? What
is clear is that large numbers of our respondents dont
know the answer to this question.
%
Dont know
State pension (eg social security)
Other savings and investments
Individual personal pension scheme
Wages or salary from paid employment
Stocks and/or shares investments
Rental income
Defined benefit pension scheme
Defined contribution pension scheme
Selling your primary residential property
An inheritance
Support from children/descendents
Selling assets tied up in investment property
Selling assets tied up in a business
16
9
9
6
2
2
11
19
6
6
5
4
5
4
3
0 5 10 15 20
Figure 12: Expected sources of retirement income
Q. Which single source of income do you expect to provide you with the largest proportion of income during
your retirement?
Base: All respondents
Worryingly, the most common response globally
was Dont know, with this being the choice of
19% of respondents (Figure 12). However, the
younger age groups accept that the state is likely
to become a less reliable source of retirement
income (Figure 13). What isnt clear is what will fill
the gap left by the state
The state is still expected to be the most likely
source of retirement income, though only 16%
thought this: this reliance on state pension
provision falls with each age group
A further 9% expect to have to keep working to
fund their retirement income: salaries are seen to
be as popular as individual personal pensions in
providing the main source of retirement income
% 30-39 year olds 40-49 year olds 50-59 year olds
14
18
23
Global average (16)
10
20
30
0
Figure 13: Younger people expect less state pension provision
Q. Which single source of income do you expect to provide you with the largest proportion of income duringyour retirement? A. State pension (eg social security)
Base: All respondents
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UAE
India
Singapore
Malaysia
Brazil
Taiwan
SaudiArabia
HongKong
Mexico
SouthKorea
Argentina
UK
Canada
France
Poland
US
China%
0
5
10
15
20
25
30
35
40
Global average (16)
2
3 3
9 10 10 10 11
13
18
21 21 22 22 22
26
40
Figure 14: Reliance on the state pension: an East-West divide
Q. Which single source of income do you expect to provide you with the largest
proportion of income during your retirement? A. State pension (eg social security)
Base: All respondents
If state provision is set to decline, and people are
not saving enough for retirement, what of the other
options for funding the retirement shortfall? Certainly,
informal channels of providing financial support for
example, through the extended family will continue
to play an important role for some (as our findings in
India show). However, this too is likely to recede over
time which leaves an increasingly important role for
the individual to save for their own retirement. With
only 9% of people expecting a personal pension to
provide their main source of retirement income, we
are clearly still a long way from realising that goal.
Mandatory savings schemes
The need to create a balanced source of retirement
income spanning the three pillars of state, employer
and individual has been central to the creation of
national pension schemes, such as the Provident
Funds in Singapore and Hong Kong or the AFORE
scheme in Mexico. These typically represent a hybrid
of second pillar (occupational) and third pillar (personal)
pension provision designed to share some of the risks
inherent in long-term investment between all the
social partners employers and employees as well as
the state which usually contributes through offering
tax incentives on any contributions made. The UK has
become the latest to adopt this approach.
CASE STUDY 2012 and the UK National Employment Savings Trust (NEST)
In this years survey we asked a number of
questions relating to the UKs plans to encourage
greater retirement savings through the newly
created NEST scheme. From 2012, NEST will
require all workers over the age of 22 to save a
minimum of 8% of their annual salary. The scheme
is expected to contribute an additional 0.7% of GDP
to pensioner incomes by 2050, and about 1.2%
by 2070. So far, UK adults have not been quick to
grasp this new addition to the savings landscape:
48% were still not aware of the scheme with
a year to go until launch
Positively, 76% of all UK respondents said that they
like the idea or would like more information about it
Of those who dont support the scheme (25%)
the majority (53%) said they distrusted any
scheme run by government. Over a third of
them (36%) thought that saving for retirement
was a matter of personal responsibility
32% of all respondents did not want advice as
part of the arrangement saying that employers
should just provide information and let the
individual make up their own minds
The success of the NEST scheme in achieving high
participation and adequate contribution rates will
require a large amount of awareness building andeducation of consumers.
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Mexicos AFORE pension scheme, which provides
pension coverage to working Mexicans, has not
created a population which is generally more
interested in its finances. Only 34% of Mexicans
discuss financial issues with their friends and family
(the second lowest in our global survey)
The Provident Funds in countries such as HongKong (where we find that 45% discuss finances
with their families) and Singapore (where 49%
do so) while high by international standards
notably lag behind the degree of consumer
engagement among most of their Asian peers in
this survey. For example, in China the figure was
59%, in Malaysia 64% and India 55%
Our findings suggest that where employees are co-
opted into default arrangements, where contribution
rates are determined by the government, people think
less actively about their retirement needs. While it
was not covered within the scope of the survey, there
may be a sense that the government has already
made the big decisions for them. Whether those
decisions turn out to be the right ones, particularly in
generating adequate retirement incomes in 20 or 30
years time, remains to be seen. While state initiatives
such as NEST will undoubtedly play a part in reducing
the retirement preparedness gap, such schemes can
lull individuals into a false sense of security about
their retirement. Therefore, it is equally important that
through consumer education, financial planning and
seeking advice, consumers realise that while such
government initiatives will help, they will not fully solve
the preparedness gap by themselves.
The need to redefineaspirations for retirement age
However the mix of retirement income is achieved,
it is unlikely that the growing retirement income
shortfalls can be funded on a sustainable basis without
people having to work longer. A clear signal in thisyears findings is the need for all governments toquickly review current state pension ages. Workinglonger beyond current retirement ages will necessarily
be part of the solution, as the UKs Pensions
Commission concluded in November 2005xx. The need
to increase retirement age is what the Commission
referred to as the unavoidable long-term trade-off
between higher public expenditure or a higher State
Pension Agexxi. Carrying on in paid employment is
one solution to filling the retirement funding gap.
This conclusion has already been made bythose 9% for whom wages or salary from paid
employment is expected to make up the main
source of retirement income
However, not all people will be able work longer:
we find that 74% are concerned about their health
in retirement. Managing ill-health will be a particular
challenge for those on low incomes and those in
manual professions who are likely to have access to
fewer financial assets and less able to keep working
Nor will all people want to work longer. We find that
the anticipated age at which people envisage full
retirement remains sticky. People are reluctantto work beyond 62 years in most countries,which is in line with effective retirement ages
already seen in most countries
While working longer, potentially by 2-3 years,
is inevitable for many, most experts agree that
retirement will be a multi-stage process over
potentially more than 30 years with periods of:
- Semi-retirement (around 60 to 70 years old)
- Active retirement (around 70 to 80)
- Passive/frail retirement (around 80 to 90)
Multiple products are and will need to be
developed by financial institutions to service
consumer needs around not only retirement
savings accumulation, but also post-retirement
income as well as long-term healthcare and wealth
transfer for wealthier individuals
Although younger generations are entering the
workforce later and deferring key life events (such as
the age that they get married), interestingly they are
not anticipating later retirement.
28 The Future of Retirement Part Two
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22
27
26
21
19
24
30-39 year olds 40-49 year olds 50-59 year olds
18
Medianage(years)
20
22
24
26
28 Got first full-time job
Got married for the first time
Figure 15: Life events are occurring later
Q. How old were you when each of these events took place in your life?
Base: All respondents
The average age at which certain key life events
are occurring is getting later with each age cohort
(Figure 15)
The average respondent in their 50s entered full-
time employment aged just less than 19 years old.
This increases to over 21 years for those currently
aged 30-39
Equally, the age at which people in their 50s got
married averaged 24 years, compared with 26
years of age of those now in their 30s
This delaying of life events has implications for
everything else in life, such as when people can
expect their incomes to peak and indeed when
they can expect to enter retirement
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Figure 16 shows how the median anticipatedretirement age is remarkably similar to currentofficial retirement age. This is true even though someof our respondents will not be entering retirement for
up to 30 years during which time retirement age may
have increased by up to five years in some countries.
This demonstrates the importance of state pension
ages in helping people to make judgments about what
constitutes a reasonable retirement age. Only four of
our countries France, Malaysia, Singapore and India reveal that people living there anticipate working
beyond the current retirement age.
We also need to redefine the role of semi-retirement.
Currently, semi-retirement is seen as a means of
supporting early retirement rather than meeting the
aspiration of governments in encouraging people to
work beyond the existing state retirement age. In our
survey we found that:
Globally, the onset of semi-retirement was
anticipated to take place during peoples late 50s
compared with life expectancy in many countries
now in the early 80s. The median average for semi-
retirement age was just 55 years
This ranges from a high of 62 years in the USA to
a low of 50 years in both India and Malaysia. This
range in part reflects differences in life expectancy
experienced in those countries. However, in all
countries the desired average semi-retirement age
is below the current pensionable age
From the perspective of extending working lives,
public policy needs to be concerned not only with
increasing the official retirement age but alsoincreasing peoples healthy age so that more of the
time that is spent in old age is spent in good health.
In the final part of this report we look at what impact
undertaking personal financial planning has on
peoples long-term preparedness, as well as looking
at what can be done to encourage greater levels of
personal savings and investment.
Latin America
Middle
East
Europe
Hong Kong
Taiwan
Singapore
South Korea
China
India
Malaysia
UAE
Saudi Arabia
Argentina
Mexico
Brazil
Canada
US
UK
Poland
France
North America
Asia
Age (years)
655550 60
65
65
65
65
62
60
62
60
60
60
6060
5855
6065
60
606565
6565
6565
6565
6665
6565
6565
6262
State retirement age (men)
Anticipated retirement age (men)
Figure 16: State retirement age drives expectations
Q. At what age do you think you will fully retire?
Base: Male respondents
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Anticipated retirement age is
remarkably similar to current
state retirement age.
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Part Three
Making the most of the planning premium
60%There remains a strong financial advice gap across the worldwith 60% having never sought professional advice.
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Profile of different consumer types:planners and advice seekers
Analysing types of consumer behaviour found in the
study, four different consumer types emerged:
Non-planners: disengaged.This group has done
nothing by way of financial planning or financialadvice. There is a complex mix of reasons why
these people do not make a plan; many lack
the necessary household income. In total, they
account for 38% of all our respondents
Non-planners: advice-seekers. This group doesnot have a financial plan, though they do at least
take professional financial advice from time to
time. They are likely to seek advice around one
particular need rather than taking holistic advice.
They make up 12% of our respondents
Planners: active self-guided. This group hasa financial plan in place but does not seek
professional expertise to help them make sense of
their finances. This group accounts for 22% of our
respondents and is likely to be younger, mid-to-high
income and internet savvy
Planners: advice-seekers. This group does havea financial plan in place and it also seeks
professional financial advice to help manage their
finances. In many respects they are very well
prepared for retirement. They make up 28% of our
respondents. As we will see below, they are more
likely to be older and wealthier
Out of our total survey of 17,849 respondents, we find
that planners make up 50% (self-guided and advice
seekers combined). Women are significantly lesslikely to be undertaking financial planning; only44% do so, compared with 54% of men, perhapsreflecting the continued influence of traditional gender
roles. Worryingly, almost two-thirds of womenwho are approaching retirement age (50-59) do notplan for their financial futures.On a positive note,younger women are more engaged in their personal
finances than older women. Women in their 30s are
closer in their approach to financial planning to men,
which is a welcome trend demonstrating women
engaging more actively in their personal finances.
0
10
20
30
40
50
60
% All males All femalesMale
30-39
Male
40-49
Male
50-59
Female
30-39
Female
40-49
Female
50-59
5458
5149
4447
4238
Figure 18: Younger men and women more likely to have a financial plan
Q. Do you have a financial plan for you and your familys future?
Base: All respondents
Almost two-thirds of women
who are approaching retirement
age (50-59) do not plan for their
financial futures.
35
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Planners: advice seekers
Planners: active self-guided
Non-planners: advice seekers
Non-planners: disengaged22%
28%
12%
38%
Figure 19: The four consumer types
Base: All respondents
Planners enjoy not only the hard benefits of financial
planning (having greater savings and pension assets
compared to non-planners) but also the softer
benefits (being able to look forward to retirement with
a more positive mindset). There is clearly a strong
correlation between planning for retirement and feeling
good about retirement. While it is difficult to identify
cause and effect, we can nevertheless observe four
distinct profiles (demographically, behaviourally and
attitudinally) between those who have financial plans
and those who do not.
Non-planners:advice seekers
Planners:active self-guided
Planners:advice seekers
More likely to be female
and have an older profile
Least likely to be inemployment, more likely
than average to be on
a part-time basis
Likely to be in lower income
groups
More likely to be living in
the Americas and Europe
About half are single, with
above average numbers
co-habiting
Over half have nodependent children
Equal numbers of men and
women
Less likely than average tobe in full-time employment
Most likely to be on average
incomes
More likely to be living in
North America and Europe,
rare elsewhere
About half are single
Least likely to havedependent children
More likely to be male
and in their 30s
More likely than average tobe in full-time employment,
more likely than average to
be self-employed
Likely to be in higher
income groups
More likely to be living in
Asia or the Middle East
Likely to be married
More likely to havedependent children
More likely to be male
and in their 50s
More likely than average tobe in full-time
employment
Likely to be in higher
income groups
More likely to be living in
North America and Europe
Likely to be married
Most likely to havedependent children
Non-planners:disengaged
Table 1: Demographic profile of the four consumer types
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Argentina
Mexico
France
Canada
US
Poland
UK
HongKong
Brazil
SaudiArabia
UAE
Singapore
SouthKorea
Taiwan
India
China
Malaysia
25 25 30
35 36 38 40
46 51 56 57 58 59 60
76 7684
Global average (50)
10
20
40
60
%
80
90
Base: All respondents
Figure 20: Planners: an East-West divide
Q. Do you have a financial plan for you and your familys future? A. Yes
Looking at the planners by country in Figure 20,
we can see the familiar theme of the East-West
split emerging in which the people of the East are
actively planning for the future, while the West is
sleep-walking into the future
All the countries in the East (with the exception of
Hong Kong) have a majority of planners. This peaks
at 84% in Malaysia
This picture is reversed in the West (except in
Brazil) where the majority are non-planners. This
peaks at 75% in Mexico and Argentina
More likely to have a
conservative risk appetite
More reliant on social
security
Concerned about debt
levels and financial hardship
in retirement
Low expectations
of retirement income
Most worried about coping
financially in retirement
More likely to have a
conservative risk appetite
Use savings products
but see state pension as
adequate back-up
Concerned about debt
levels and financial
hardship in retirement
High expectations of
retirement income, second
to advice seeking planners
More worried about coping
financially in retirement
More likely to have
a moderate risk appetite
Most likely to rely on
savings and investments as
the main source of
retirement income
See retirement as a time of
freedom
Slightly above average
expectations of retirement
income, but lower than
advice seekers
Less worried about coping
financially in retirement
More likely to have
a moderate risk appetite
Most reliant on private
pensions to fund
retirement
Positive outlook on
retirement, seeing it as a
time of opportunity
Highest expectations of
retirement income
Least worried about coping
financially in retirement
Non-planners:disengaged
Non-planners:advice seekers
Planners:active self-guided
Planners:advice seekers
Table 2: Attitudes and behaviours of the four consumer types
37