By Daxim Lucas
Philippine Daily Inquirer
It doesn't matter how old you are, but if you thought last year that you’re all covered when your retirement time comes, you might want to think again.
Given the financial upheaval caused by the global economic crisis, UK-based banking giant HSBC believes that a “perfect storm,” of demographic, individual and financial elements, is poised to derail people’s retirement plans “unless they prepare properly now.”
This recommendation is among the insights revealed in the latest survey of the bank’s HSBC Insurance unit, which was published recently.
Perfect storm
“A perfect storm is confronting pensions planning, created by an aging population, falling pension funds values, a drop in state and employer contributions and an economic downturn which is forcing people to make tough financial choices,” HSBC group chair Stephen Green said about the findings.
According to the findings of the fifth annual Future of Retirement study, people’s short-term survival strategies during a recession often create “serious long-term pension ‘downturn deficits.’”
It also noted that there is “a continuing lack of pensions planning, even though people are aware that they are likely to live longer” which is being exacerbated by “poor levels of financial understanding, education and access to advice.”
Also during difficult financial times, people are more concerned with protecting their possessions in the short-term than ensuring they can look forward to a financially secure retirement, the survey revealed.
“The consequence of these combined factors is that many people will struggle to make ends meet when they come to retire, unless they urgently review their priorities and planning,” the HSBC study concluded.
The survey culled its findings from 15,000 respondents in Brazil, Canada, China, France, Hong Kong, India, Japan, Mexico, Saudi Arabia, Singapore, South Korea, Turkey, the United Arab Emirates, the United Kingdom and the United States.
The results are used by HSBC to structure financial solutions for an estimated 128 million clients worldwide.
The latest edition—dubbed “It’s Time to Prepare”—identified a ‘preparedness gap’ in people’s pensions planning worldwide, with nearly nine out of 10 people feeling ill-prepared for their retirement.
It found that only 13 percent of the respondents feel fully prepared for their retirement, and 86 percent are unsure of what income they will receive in retirement.
Only 27 percent feel they fully understand their long-term finances, while 43 percent have undertaken some planning for later life—but still remain unclear about what their retirement income will look like.
More alarmingly, 14 percent have done “no retirement planning at all.”
“The preparedness gap reveals that families need greater support and guidance to effectively handle their finances, not simply in schools and colleges but through trusted advisers providing professional financial guidance,” Green said.
Golden opportunity
“If people prepare adequately for the long-term, an extended later life can present a golden opportunity for many—but now is the time for people to seriously consider boosting their pensions contributions to improve their prospects of a comfortable retirement,” he added. “The cost of procrastination is likely to be high.”
Nonetheless, the study found sufficient basis for hope in strengthening the financial prospects of people of all ages, as their move toward retirement.
The so-called “advice gap” showed that there is a need for solid financial advice to help this market, which financial service firms like HSBC can provide.
The survey revealed this advice gap linking the lack of preparedness to insufficient financial education and guidance.
A full 43 percent of respondents have never had any form of financial education, and 29 percent felt “fairly unprepared” for their retirement, according to the findings.
Almost half—or 47 percent of respondents—have never had any form of professional financial advice, it added.
“This year’s report reveals a need for people to have access to more and better financial advice and guidance to help them survive the downturn while making the right financial decisions for the long-term,” said HSBC Insurance group managing director Clive Bannister in a statement.
But perhaps the most alarming results of the survey showed that, in trying to protect their finances during the ongoing crisis, many people are actually putting themselves in greater financial danger, inadvertently.
People are paying little attention to long-term considerations such as their likely retirement needs, focusing instead on purely practical short-term concerns, which they better understand, HSBC said.
“General insurance solutions—motor, travel, home and even pet insurance—are seen as a greater priority than addressing longer-term needs around insuring health or income, even when job security is in question,” the survey said.
Delay in retirement
And despite global economic uncertainty, only 6 percent said they intend to take out income protection insurance in the next 12 months compared to 16 percent insuring their home.
Also, as a result of the economic downturn, 92 percent of people have changed some element of their finances, with only 19 percent still on track to retire according to their original plans.
Because of the crisis, about 17 percent are reducing retirement savings or stopping saving for retirement altogether, while 18 percent have used savings to pay off debt.
Along with the global trend, 9 percent of respondents now expect to delay their retirement.
“[The survey] reveals the lack of understanding people have around their long-term retirement needs, said Cicero Consulting financial services consultancy director Mark Twigg, whose group conducted the survey. “They are less well-educated or aware when trying to understand these needs and to act on them, than with their short-term requirements.”
“As the economic ‘perfect storm’ threatens, it is important that people are encouraged to understand long-term risks and to manage them effectively. While people are taking more responsibility for themselves, there is also a definite role for financial institutions to continue, and to build on, their work to educate and inform,” he said.
Philippine Daily Inquirer
It doesn't matter how old you are, but if you thought last year that you’re all covered when your retirement time comes, you might want to think again.
Given the financial upheaval caused by the global economic crisis, UK-based banking giant HSBC believes that a “perfect storm,” of demographic, individual and financial elements, is poised to derail people’s retirement plans “unless they prepare properly now.”
This recommendation is among the insights revealed in the latest survey of the bank’s HSBC Insurance unit, which was published recently.
Perfect storm
“A perfect storm is confronting pensions planning, created by an aging population, falling pension funds values, a drop in state and employer contributions and an economic downturn which is forcing people to make tough financial choices,” HSBC group chair Stephen Green said about the findings.
According to the findings of the fifth annual Future of Retirement study, people’s short-term survival strategies during a recession often create “serious long-term pension ‘downturn deficits.’”
It also noted that there is “a continuing lack of pensions planning, even though people are aware that they are likely to live longer” which is being exacerbated by “poor levels of financial understanding, education and access to advice.”
Also during difficult financial times, people are more concerned with protecting their possessions in the short-term than ensuring they can look forward to a financially secure retirement, the survey revealed.
“The consequence of these combined factors is that many people will struggle to make ends meet when they come to retire, unless they urgently review their priorities and planning,” the HSBC study concluded.
The survey culled its findings from 15,000 respondents in Brazil, Canada, China, France, Hong Kong, India, Japan, Mexico, Saudi Arabia, Singapore, South Korea, Turkey, the United Arab Emirates, the United Kingdom and the United States.
The results are used by HSBC to structure financial solutions for an estimated 128 million clients worldwide.
The latest edition—dubbed “It’s Time to Prepare”—identified a ‘preparedness gap’ in people’s pensions planning worldwide, with nearly nine out of 10 people feeling ill-prepared for their retirement.
It found that only 13 percent of the respondents feel fully prepared for their retirement, and 86 percent are unsure of what income they will receive in retirement.
Only 27 percent feel they fully understand their long-term finances, while 43 percent have undertaken some planning for later life—but still remain unclear about what their retirement income will look like.
More alarmingly, 14 percent have done “no retirement planning at all.”
“The preparedness gap reveals that families need greater support and guidance to effectively handle their finances, not simply in schools and colleges but through trusted advisers providing professional financial guidance,” Green said.
Golden opportunity
“If people prepare adequately for the long-term, an extended later life can present a golden opportunity for many—but now is the time for people to seriously consider boosting their pensions contributions to improve their prospects of a comfortable retirement,” he added. “The cost of procrastination is likely to be high.”
Nonetheless, the study found sufficient basis for hope in strengthening the financial prospects of people of all ages, as their move toward retirement.
The so-called “advice gap” showed that there is a need for solid financial advice to help this market, which financial service firms like HSBC can provide.
The survey revealed this advice gap linking the lack of preparedness to insufficient financial education and guidance.
A full 43 percent of respondents have never had any form of financial education, and 29 percent felt “fairly unprepared” for their retirement, according to the findings.
Almost half—or 47 percent of respondents—have never had any form of professional financial advice, it added.
“This year’s report reveals a need for people to have access to more and better financial advice and guidance to help them survive the downturn while making the right financial decisions for the long-term,” said HSBC Insurance group managing director Clive Bannister in a statement.
But perhaps the most alarming results of the survey showed that, in trying to protect their finances during the ongoing crisis, many people are actually putting themselves in greater financial danger, inadvertently.
People are paying little attention to long-term considerations such as their likely retirement needs, focusing instead on purely practical short-term concerns, which they better understand, HSBC said.
“General insurance solutions—motor, travel, home and even pet insurance—are seen as a greater priority than addressing longer-term needs around insuring health or income, even when job security is in question,” the survey said.
Delay in retirement
And despite global economic uncertainty, only 6 percent said they intend to take out income protection insurance in the next 12 months compared to 16 percent insuring their home.
Also, as a result of the economic downturn, 92 percent of people have changed some element of their finances, with only 19 percent still on track to retire according to their original plans.
Because of the crisis, about 17 percent are reducing retirement savings or stopping saving for retirement altogether, while 18 percent have used savings to pay off debt.
Along with the global trend, 9 percent of respondents now expect to delay their retirement.
“[The survey] reveals the lack of understanding people have around their long-term retirement needs, said Cicero Consulting financial services consultancy director Mark Twigg, whose group conducted the survey. “They are less well-educated or aware when trying to understand these needs and to act on them, than with their short-term requirements.”
“As the economic ‘perfect storm’ threatens, it is important that people are encouraged to understand long-term risks and to manage them effectively. While people are taking more responsibility for themselves, there is also a definite role for financial institutions to continue, and to build on, their work to educate and inform,” he said.
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