HSBC warn of 'perfect pensions storm'
By Kate Morley - 11/06/2009
A ‘perfect storm’ of demographic, individual and financial elements is poised to derail people’s retirement plans unless they prepare properly now, a global survey from HSBC Insurance has revealed.
The fifth annual Future of Retirement study, It’s Time to Prepare, shows that a combination of factors such as lack of pensions planning, poor levels of financial understanding, limited access to advice, and reduced funds due to economic downturn, mean that many people will struggle to make ends meet when they come to retire unless they urgently review their priorities and planning.
Stephen Green, Group Chairman of HSBC, said: “A perfect storm is confronting pensions planning, created by an ageing 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.”
‘It’s Time to Prepare’ has identified the worrying statistic that nearly 9 out of 10 people do not feel fully prepared for their retirement. The survey, which questioned 15,000 people in 15 countries, making it the largest study of its kind in the world, reveals:
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Only 13% of respondents feel fully prepared for their retirement
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86% do not know what income they will receive in retirement
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Only a quarter (27%) feel they fully understand their long-term finances
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Approaching half (43%) have undertaken some planning for later life, but still remain unclear about what their retirement income will look like
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14% have done no retirement planning at all.
Stephen Green continued: “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’ ”.
But this preparation is not always made easy; the report also uncovers a worrying lack of financial education and guidance, with the respondents revealing that:
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43% have never had any form of financial education
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Almost half (47%) have never had any form of professional financial advice
Clive Bannister, Group Managing Director, HSBC Insurance, said: “This year’s Future of Retirement 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.”
The cost of the recession too is a factor in the financial planning of most, as the report identifies a diversion of funds from long-term considerations such as likely retirement needs, to purely practical short-term concerns. As a result of the economic downturn survey shows,
- 92% of people have changed some element of their finances
- Only 19% will now retire as planned
- 17% are reducing retirement savings or stopping saving for retirement altogether
- 18% have used savings to pay off debt
- 9% expect to delay their retirement
Mark Twigg, Director at financial services consultancy Cicero Consulting, which undertook the survey for HSBC Insurance, said: “It’s Time to Prepare reveals the lack of understanding people have around their long-term retirement needs.
“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.”