The Future of Retirement Life after work? Singapore Report

Transcription

1 The Future of Retirement Life after work? Singapore Report

2

3 Contents Foreword by HSBC Introduction Key findings Part 1 The transition to retirement Part 2 Retirement aspirations versus reality Part 3 Leaving a legacy Part 4 Income, spending and saving in retirement Part 5 Practical steps towards a better retirement 3

4 Foreword Welcome by HSBC At HSBC, our purpose is to help customers fulfil their hopes and dreams and realise their ambitions, for themselves and their families, by enabling them not only to manage their financial affairs today but also to plan for their long-term financial future. I am therefore delighted to introduce the latest report in The Future of Retirement series of independent global research studies, commissioned by HSBC. Life after work? is our ninth report and compares the real-life experience of today s retirees with the views and expectations of those still working towards retirement. With the benefit of this hindsight, the report explores key retirement issues including transitioning into retirement, ensuring an adequate post-retirement income, leaving a legacy for future generations and achieving later life aspirations. It also includes some practical steps that people can take to help secure a more comfortable retirement. In this report we can see how a new retirement landscape is slowly emerging. The desire to live a full life after work can be seen in the widely held aspirations for healthy and prosperous retirement. People also aspire to leave a positive financial legacy for their children and grandchildren, during retirement and through inheritances. Yet such goals are being put at risk by a failure to prepare adequately. Indeed, many of those in retirement regret not having saved more when they were younger, or having retired too soon, and share the impact those decisions are having on achieving their retirement aspirations. I hope that the revealing insights in this report, and the practical lessons shared by today s retirees, will encourage everyone to take the necessary steps towards a more comfortable retirement. Simon Williams Group Head of Wealth Management, HSBC 4 The Future of Retirement Life after work?

5 Introduction The Future of Retirement is a world-leading independent research study into global retirement trends, commissioned by HSBC. It provides authoritative insights into the key issues associated with ageing populations and increasing life expectancy around the world. The latest global report, Life after work?, is the ninth in the series and is based on a survey of more than 16,000 people in 15 countries conducted between July 2012 and April While previous Future of Retirement reports have largely focused on how people plan and save for a comfortable retirement, this report looks at the process of retiring itself, and compares the real-life experiences of people in retirement with the expectations of those of working age. This country report, based on the views of over 1,000 respondents, highlights the main findings about living in retirement and the implications for people saving for retirement. The first part focuses on the transition from working to retirement and the prevalence of semi-retirement. The second part explores how people s expectations of retirement compare with the reality of living in retirement, how well current retirees are prepared for their retirement, and what is the best financial advice that they have ever received. The third part takes a closer look at various forms of legacy, including loan and gift giving, the funding of others during retirement, and inheritance. The fourth part analyses what people are earning, spending and saving in retirement, and where this money comes from. The final part outlines some practical steps that people can take to improve their financial well-being in later life. Unless otherwise stated, the data is country-specific, figures are rounded to the nearest whole number and monetary values are expressed in local currency. The global report, other country reports and all previous reports are available on Try The Future of Retirement survey yourself See how you compare against your country findings by answering 3 quick questions on our online survey tool at

6 Key findings One-in-six (17%) people who are not fully retired expect they will never be able to afford to retire from all paid employment. Working age people expect to retire on average at 60, the same as their parents. One-in-six (17%) of year olds have semi-retired, and over half (58%) of year olds expect to do so. Of the retirees who have been unable to achieve all their retirement aspirations, nearly two-fifths (38%) have taken up other interests instead, whilst over a quarter (26%) blame health reasons. Encouragingly, nine out of ten (88%) of today s retirees say their preparations for retirement turned out to be at least adequate. When retirees were asked about the best financial advice they have ever received, the most popular answer was Start saving at an early age (chosen by 39% of retirees), followed by Start saving a small amount regularly (33%) and Develop a financial plan for the future (31%). The majority of those not fully retired (64%) have never received a significant financial gift or loan from parents or relatives. Nearly one third of working age people who have received such a gift or loan used it to help with education (31%) and over one quarter used it for getting married (27%). Inheritance expectations differ between retirees and working age people: over two-thirds (70%) of retirees expect to leave an inheritance, whereas one-third (34%) of those not fully retired expect to receive one. Entering retirement was accompanied by a fall in income for only a minority of retirees, and 66% say their retirement outgoings are the same or greater than before. Cash is the source of over a quarter (29%) of retirement income, with the state pension (21%) and investment income (18%) also important. 6 The Future of Retirement Life after work?

7 57% expect to semi-retire, on average at age 57 Part 1 The transition to retirement Around the world, retirement ages are increasing, yet in Singapore working age people do not believe this to be the case. Working age people claim that their main earning parent retired from all employment on average at 60, and they themselves say they will also be able to afford to retire on average at 60. Within this average figure, 17% expect never to be able to afford to give up all paid employment. Semi-retirement involves a reduction in working hours but a continuation of some paid employment as one approaches or reaches retirement age. Three-fifths of those not fully retired either plan to semi-retire (57%) or are already semi-retired (4%). Moreover, whilst 17% of year-olds are already semi-retired, almost three fifths (58%) of younger people (25-34 year-olds) expect to move into semi-retirement before retiring fully. Figure 1: Nearly a fifth of year olds are semi-retired, and almost three fifths of workers expect to semi-retire Q: Do you expect to move from working full-time into semi-retirement before you retire fully? (Base: Not fully retired) 12% 27% 13% 26% 10% 30% 11% 15% 20% 19% Don t know 57% 58% 55% 63% 49% No Yes I expect to move into semi-retirement Yes I have already moved into semi-retirement 4% 3% 5% 6% 17% Average year olds year olds year olds year olds 7

8 Semi-retirement is currently not the norm amongst retirees: only 38% were given the option, though of these the great majority (81%) took it up. Of those who plan to semi-retire, many have positive reasons for doing so: over half (57%) are motivated by wanting to keep their brains alert, 43% because they enjoy working and 41% to ease the transition into retirement. However financial issues are also a concern, with almost a third (30%) planning to semi-retire because they cannot afford to retire full time. Figure 2: The reasons for choosing semi-retirement are largely positive Q: Why do you expect to move or why have you already moved from working full- time into semi-retirement? (Base: Not fully retired) I would like to keep active/keep my brain alert I like working and want to continue in some capacity I would like an easy transition into retirement I cannot afford to retire full time I need to bridge a shortfall in retirement income I no longer need to work full time Health reasons/physical demands of my work I am still/will be paying off my mortgage My household expenditure is higher than I envisaged I am still/will be paying off other debts I have/will have family members to support past normal retirement age Other reason Don t know 3% 1% % 16% 15% 15% 15% 14% 23% 57% 43% 41 % 30% % expect never to be able to afford to fully retire 8 The Future of Retirement Life after work?

9 9% of retirees say that financially they have not prepared adequately or at all for a comfortable retirement Part 2 Retirement aspirations versus reality Retirement is the life stage when many people expect to have more free time, have no dependents to look after and achieve their later life aspirations. However, the reality of retirement does not always live up to peoples hopes: for example, starting a business is a key retirement aspiration for many, but 16% say they have not achieved this aspiration. More modest aspirations such as spending more time with friends and family (achieved by 51%) are much more likely to be realised. Figure 3: Retirees are only achieving some of their retirement aspirations Q: Many people have specific hopes and aspirations for their retirement. Which, if any, of the following have you been able to realise since retiring? (Base: Fully retired) Q: Which, if any, of the following hopes and aspirations have you been unable to realise since retiring? (Base: Fully retired) Spending more time with friends and family Taking more exercise/playing more sport Frequent holidays Learning a new skill/hobby Home improvements/gardening Charity/voluntary work Extensive travel Living abroad Buying a new car/other expensive item Starting a business Continuing to work to some extent Learning a foreign language Further education Writing a book None of these Don t know 1% 3% 13% 51% 37% 12% 15% 37% 34% 13% 9% 29% 11% 14% 25% 23% 16% 20% 9% 16% 15% 16% 14% 18% 10% 14% 13% 11% 8% 19% 13% 28% Aspiration achieved Aspiration not achieved

10 39% of retirees say that Start saving at an early age is the best financial advice they have ever received When asked why they have not been able to realise all their hopes and aspirations, retirees most often cite having taken up other interests or activities instead (38%), having less money than envisaged (26%), and health reasons (26%). Of those who have less money than envisaged to realise their aspirations, over half (88%) regret that they did not save more. Over half (57%) of working age people say that financially they are not preparing adequately or at all for a comfortable retirement. In contrast, only 9% of retirees think that they failed to prepare adequately (7%) or at all (2%) for a comfortable retirement. On a more positive note, 88% of retirees think their retirement preparations were at least adequate, although it is difficult to assess whether the extra healthcare costs associated with frail old age have been fully considered. Therefore, even those who believe they are prepared for a comfortable retirement should nevertheless regularly review their situation during retirement. Given that a lack of adequate preparation can be an obstacle to realising retirement aspirations, we asked retirees to look back at the best financial advice they have ever received. Start saving at an early age was the most popular choice (chosen by 39%), followed by Start saving a small amount regularly (33%) and Develop a financial plan for the future (31%). Figure 4: Nearly one in ten retirees think they did not prepare adequately or at all for a comfortable retirement Q: Overall, financially do you think that you prepared adequately for a comfortable retirement? (Base: Fully retired) More than adequately About adequately Not adequately Not at all Don t know 7% 2% 3% 38% 50% Figure 5: Start saving at an early age is the best financial advice retirees have ever received Q: People sometimes say If only I knew then what I know now. Which, if any, of the following would you say is the best financial advice you have ever received? (Base: Fully retired) Start saving at an early age 39% Start saving a small amount regularly 33% Develop a financial plan for the future 31% Buy your own home as soon as you can afford to 29% Don t spend what you don t have 28% Invest in property 26% Obtain some professional financial advice 25% Buy only what you need 24% Save as much money as you can 22% Neither a borrower nor a lender be Save up to buy something that you can t afford at the time Try high/higher return investments 16% 15% 20% Stick to low/lower risk savings 13% Live for today rather than tomorrow 8% Other advice Don t know/can t recall 0% 17% 10 The Future of Retirement Life after work?

11 70% of retirees expect to leave an inheritance to their children Part 3 Leaving a legacy An important goal for many retirees is to leave a legacy to their children or other relatives, which often takes the form of a financial gift, loan or inheritance. This assistance from parents and older relatives can be very helpful to younger people in achieving important goals such as higher education or home ownership. However, receiving a significant financial gift or loan from parents is not common, with only 31% of the working age population having received one, and only 39% of retirees have themselves benefitted from this type of legacy. Among working age people who have received a significant gift or loan, nearly a third (31%) used it to help with the cost of education, whilst a slightly lower proportion (27%) spent it on getting married. Younger people (25-34 year olds) are especially likely to have received gifts or loans for education (40%). Where gifts or loans are received, they can be of considerable value, with a total median value of SGD37,583. However, despite the relative generosity of these gifts, 36% of working age recipients say it made no difference to their ability to save for retirement though 37% say it made such saving easier. Figure 6: Working age people are less likely than retirees to have received a significant financial legacy Q: Did/have your parents or other relatives ever given you a significant financial gift or loan? (Base: All respondents) 36% 64% 48% Not fully retired Fully retired 19% 14% 12% 14% 4% Yes gift Yes loan No Don t know 11

12 Inheritance is another way of leaving a financial legacy to children. Surprisingly, there are more retirees expecting to leave an inheritance (70%) than there are non-retirees expecting to receive one (34%). Only a small number (4%) of non-retirees have already received an inheritance. Inheritances are often used to fund longer term financial goals such as retirement: of non-retirees expecting to receive an inheritance (or who have already received one), 75% expect it to at least partly fund their retirement, with 8% expecting it to completely pay for it. The median inheritance expected by working age people is SGD98,376, less than a quarter of the amount that retirees are expecting to leave (SGD473,219). This difference can be explained in part by the fact that inheritances are often divided between more than one beneficiary. Figure 7: More retirees expect to leave an inheritance than younger people expect to receive one Q: Do you expect to leave an inheritance to your children? (Base: Fully retired) Q: In total, how much do you expect to leave in inheritances to your children including the value of any property, cash, etc? (Base: Fully retired) Q: Do you expect to receive an inheritance? (Base: Not fully retired) Q: In total, how much have you received and/or do you expect to receive in inheritances, including the value of any property, cash, etc? (Base: Not fully retired) Fully retired people expecting to leave an inheritance Working age people expecting to receive an inheritance Proportion of people Median value Proportion of people Median value 70% SGD473,219 34% SGD98,376 Figure 8: Only a third of retirees are not funding anyone in retirement Q: Apart from you and your partner (if applicable), who of the following are you funding or do you expect to fund to a significant extent during your retirement? (Base: Fully retired) Q: Apart from you and your partner (if applicable), who of the following do you expect to fund to a significant extent once you are fully retired? (Base: Not fully retired) Don t know 14% 23% Not fully retired Fully retired Charitable causes 3% 16% Other dependents 3% 5% My grandchildren 3% 7% My children 27% 38% My parents 14% 19% No one 12 The Future of Retirement Life after work? 34% 36%

13 Another way that people can create a financial legacy in retirement is by funding a dependent: these are most likely to be children but could also be grandchildren or even elderly parents. Funding dependents in retirement is more common in Singapore than the global average, undertaken by 42% of today s retirees. For the next generation, it appears that funding your children whilst in retirement will become increasingly common: 27% of current retirees are financially supporting their children, while 38% of future retirees believe they will be doing so. 41% of retirees are significantly funding other family members 13

14 Part 4 Income, spending and saving in retirement A major consequence of retirement is that income is likely to fall considerably, compared with beforehand. In Singapore this appears to be less the case than elsewhere, with just 31% of retirees saying that their income has fallen in retirement, and for 37% their income is actually greater than it was immediately before retirement. Perhaps surprisingly, 66% of retirees say that their spending is the same or greater than beforehand. Where expenditure does fall, it does not do so by much: only a tiny minority (3%) have reduced their outgoings by more than half. Figure 9: Only a third experience a fall in income on entering retirement Retirement income level vs. pre-retirement 9% Retirement income level vs. expectation 4% Q: Thinking about your income in retirement, how does it compare with your income immediately before you retired? If you moved from full to part-time working prior to retiring, please think about your final income in full time employment. 15% 13% 37% 12% 12% 36% Q: To what extent is your retirement income in line with your expectations before you retired from full time employment? (Base: Fully retired) 4% Greater About the same Up to 25% lower 23% 26% A lot more A little more About the same 11% 26-50% lower A little less More than 50% lower A lot less 14 The Future of Retirement Life after work? Don t know Don t know

15 Nevertheless, it is concerning that a quarter (24%) found that they are earning less than they anticipated in retirement, and even those whose retirement income is in line with their expectations face the possibility of extra healthcare costs should they enter frail retirement. Of those earning less in retirement than expected, the most commonly cited reason is the impact of the global economic crisis on lowering retirement fund values (57%). Figure 10: Cash, the state pension and investments are key sources of retirement income 31% saw their income fall on retiring, and 15% saw it fall by more than half Q: What proportion of your retirement income is funded from each of the following sources? (Base: Fully retired) 12% 5% 18% 10% 5% 17% 20% 8% 29% 27% 24% Other sources (inheritance, selling a business, family & friends, lottery, windfall etc) Property income and assets, e.g. renting out, equity release, downsizing, sale Investments, e.g. bonds, endowments, shares, unit trusts, mutual funds Cash savings/deposits Personal pension(s) Company pension(s) State pension(s)/benefits 10% 9% 5% 5% 36% 21% 26% 5% 3% 4% Retirees Male retirees Female retirees The research also looked at where retirement income is coming from. The largest proportion (29%) of the average retiree s income comes from cash savings, with the state (21%) and investments (18%) also making significant contributions. Working age people also expect a large proportion of income (35%) to come from cash, though they think a significantly smaller share (8%) of their income will come from the state. Male and female retirees have similar retirement income sources, although women are more reliant on cash savings. 15

16 Part 5 Practical steps towards a better retirement Here are some important insights and practical actions, based on the global research findings, which may help today s retirement savers plan a better financial future for themselves. Action 1. Don t rush into retirement There is a view among retired people that they might have been too hasty in giving up paid employment. Nearly two-thirds (64%) who entered semi-retirement wished that they had stayed in full time employment longer. This regret is largely for positive reasons, with many retired people seeing work as an important means of keeping the body and mind active. Action 2. Don t rely on one source of retirement income Current retirees have three different sources of retirement income on average, wisely choosing not to generate all of their income from one place. Spreading their sources of retirement income and associated risks means that not all their eggs are in one basket. Action 3. Plan your retirement with family in mind Rather than family ties loosening in future, the family will continue to be a major consideration in retirement planning, and may even grow in importance for the next generation. While many people (40%) aspire to travel extensively during their retirement, nearly half (49%) of current workers expect to have some financial responsibilities towards others even when they are themselves retired. This includes ongoing financial responsibilities for their adult children as well as supporting frail elderly parents. Action 4. Be realistic about your retirement outgoings Many working people assume that their income needs will fall once they enter retirement. Yet 52% of people in retirement have seen no reduction in their outgoings, and 17% have seen their outgoings increase. Although people are familiar with the concept of increasing life expectancy, the consequent increase in later life medical and nursing care costs may not be well understood as people are still not doing enough to prepare themselves for these potential costs. 16 The Future of Retirement Life after work?

17 52% saw their outgoings stay the same or increase on retiring

18 HSBC Insurance Holdings Limited 2013 All rights reserved. Excerpts from this report may be used or quoted, provided they are accompanied by the following attribution: Reproduced with permission from The Future of Retirement, published in 2013 by HSBC Insurance Holdings Limited, London. Published by HSBC Insurance Holdings Limited, London Designed and produced by Global Publishing Services and Cicero-Group HSBC Insurance Holdings Limited 8 Canada Square London E14 5HQ