Nearly one in eight (12%) of respondents think they will never be able to afford to retire fully, according to research by HSBC.
The future of retirement report, which surveyed 16,000 people in 15 countries, found that this figure is higher in some countries.
In the UK, 19% of respondents expected they would never be able to retire fully, while 18% of US respondents said the same. This is followed by Canada and Singapore (17%), Egypt (16%), Australia (15%) and India (12%).
Among those who have retired, 38% found their income was less than they had expected. Of these, one-third blamed the global financial crisis, while another third said they had not planned adequately.
The research also found:
- 63% of retired people worried that they did not have enough money to live on and 70% regretted not having saved more.
- 44% of respondents aged between 55 and 64 said it was an aspiration to continue working.
- 17% of respondents aged between 55 and 64 expect they will have to continue working indefinitely.
Simon Williams, group head of wealth management at HSBC, said: “Generating an adequate income in retirement remains a major challenge for most people, given the financial conditions created by the global economic downturn.
“Today’s workers should prepare for retirement as early as possible to have some certainty. Life is full of reasons to prioritise short-term spending over long-term planning, but the sooner people start saving, the less they are likely to need to carry on working in retirement.”
Clare Abrahams, head of auto-enrolment at Lorica Employee Benefits, added: “The pension problem returns, over and over again, to this… it is okay to get to retirement and not have a decent pension, but it is never okay for it to be a surprise.
“And that’s what most people are living with now, heads in the sand, surprised when they don’t have enough money for retirement.
“While government policies such as auto-enrolment are supposed to correct this, the hard truth is that until Britons understand more about their future savings, the surprise factor is inevitable.
“Steve Webb, pensions minister, has given himself a pat on the back re auto-enrolment, saying low employee opt-out rates are evidence of success, but a closer look shows only a tiny minority of UK pension savers are saving enough for a comfortable retirement. And this is not likely to be the case even when the full auto-enrolment contribution levels come in 2018.
“Suspicions of pensions abound in this country, and worse, too many people believe their current property will provide their pension scheme. Unfortunately, this is dangerous thinking, and not enough is being done to correct it.”
There is no doubt that without some dramatic change of events successive generations are not going to have the pension income necessary for them to be able to fully retire at what we have traditionally seen as normal retirement age.
We may in fact now be at a pivotal stage with the impact of the demise of high quality final salary pension schemes starting to take effect, with annuity rates from defined contribution plans offering very poor value, with increasing longevity and with state pension ages continuing to be pushed back. The apparent early success of the government’s auto-enrolment programme is the one bright spot on the horizon, but it is not guaranteed to continue longer term and even then for many – certainly on present plans – will be too little too late.
Rather perversely, it may be, in a way, good news that the people interviewed in the HSBC survey appear to be aware of the problems and limited options they face in the future if they do not have a meaningful pension plan or some other saving arrangement in train well before they reach pension age. It may be we are no longer talking about individuals ‘sleepwalking’ into an impoverished old age, but rather approaching it with their eyes wide open and fully aware of what they may be facing.
Whether they are willing and able to do anything meaningful about it is another matter. Clearly, the government and we in the pension industry must redouble our efforts to have better pension schemes available, ones which deliver better outcomes for members and more certainty as to the level of incomes that will result. We need to have a fairer system of charges, find an alternative to the current mess that are annuities and take whatever steps are necessary to restore consumer confidence in pensions and those that provide them.
But at the end of the day it is down to individuals to be prepared to save for their later years and starting early is the key in that respect. Working until you drop is hardly a desirable state of affairs. Being able to retire at an age which suits you is something we should all aspire to, but have to plan and prepare for well in advance.
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