Introductionby the author
The world’s population is steadily growing older. The prospect o enjoying a retirement lasting 20 to30 years is already a reality or many. In the 34 countries which make up the OECD(The Organisation or Economic Co-operation and Development), a recent study showed averageretirement currently lasts over 18 years. By the middle o this century, it is perectly reasonable topredict this will become the norm in all developed and emerging markets across the world.In response, all o the countries in this year’s Future o Retirement survey will need to developnew approaches in the coming decades to ensure that retirement incomes will be both sustainableand adequate. Against this backdrop, the roles o the state, the employer, the amily and theindividual are already being redened; so too is the traditional reliance witnessed in manydeveloped countries on the ‘pension’ as the main source o retirement income, as the nancialrisks acing households become more complex.Retirement planning may no longer consist o simply putting money aside each month.The uture o retirement is expected instead to see a undamental change in people’s liestyleswith a growing aspiration to combine work and leisure to help manage the costs o longer lieexpectancy. Employment already orms part o many people’s retirement plans as can be seen inthe large gap in many countries between state retirement ages (the age at which people becomeeligible or any social security entitlements) and the ‘eective’ retirement age (the age at whichpeople actually stop working). However, we are now witnessing an acknowledgement amongthose in their 30s and 40s that working in retirement is, and may have to be, part o their ormalretirement plans. With employment now seen as part o a fexible retirement plan, it is clear thatthe labour market will need to adapt and health and long-term care policies need to be developedaimed at promoting more active and healthy lie styles among older workers.Nor will retirement planning in uture simply be a matter o generating a retirement income.The impact o the economic downturn shows how protecting incomes and assets againstunoreseen lie events, such as periods o unemployment and ill-health, should play a undamentalrole in protecting people’s ability to save or the long-term during their working lives. Protectinghousehold assets against the increasing cost o a rail retirement adds a urther nancial challenge.As the majority o people in developed countries can now expect to live into their 80s and beyond,many o those people will require additional long-term care provided through the state, amiliesor other private means. Eorts to raise awareness about the risks o retirement income shortallsneed to continue. So too do the fedging eorts to develop eective nancial planning tools to helphouseholds evaluate that risk.
Executive Director, Cicero Consulting
Foreword by HSBC
At HSBC, our purpose is to help customersulll their hopes and dreams and realize theirambitions, or themselves and their amilies, byenabling them not only to manage their nancialaairs today, but also to plan or their long-termnancial uture.
I am thereore delighted to introduce the latest in HSBC’s series oindependent global studies into The Future o Retirement.
A new reality
isour eighth report and highlights the signicant challenges in planning orand achieving a comortable retirement.This report reveals that saving and investing or retirement is a majorchallenge or most people. The economic downturn is putting added pressureon household incomes, and as a result, many people admit that nanciallythey are not preparing adequately, or at all, or a comortable retirement.There are, o course, many obstacles to saving, including the lack o aregular savings habit and the nancial impact o unexpected lie events.Unortunately, the impact o saving too little or too late will only becomeclear in later years, when people nd they are retiring without the necessaryincome to support an active and ullling retirement.The report also highlights the benets o planning ahead: on average, peoplewho have a plan or retirement not only save more but also save moreregularly, resulting in them having over three times the mean valueo retirement savings compared with those who don’t have a plan in place.With lie expectancy still on the increase, the need to save and plan orretirement is becoming ever more critical. Retirement is one o the ve keyneeds we discuss with our customers, and I hope the insights rom thisreport will encourage everyone to think more about the need to plan andsave or their retirement, and to start as early as possible.
Group Head o Wealth Management, HSBC
54 The Future o Retirement