Retirees face long-term financial hangover as economic downturn bites
The long-term impact of the global economic downturn will be felt for many decades to come, according to new research by Ipsos for HSBC.
Despite encouraging signs of economic recovery, the longer-term impact will cause waves for millions of people who have weathered the storm by raiding their retirement funds and amassing debt, reveals HSBC’s latest report, The Future of Retirement A balancing act.
HSBC’s survey of 16,000 people worldwide found that two in five working age people (40%) stopped or reduced their retirement savings during the downturn – whether through investments (25%), cash deposits (24%) or employer or personal pension schemes (19% respectively).
This means that millions of people could enter retirement with savings diminished by a fifth or more after getting into debt or severe financial difficulty. In some countries this ‘retirement savings shortfall’ – the reduction in their retirement savings pot as a result of debt or financial constraint – is almost half, with people in the UK and Canada able to save significantly less than those who are unaffected by debt or financial hardship, by the time they reach retirement age.
And despite signs that the global economy picked up in 2014, debt accumulated in the tough times continues to blight people’s abilities to save for their future. For 22% of working age people, debt repayment and slipping into severe financial difficulties have significantly impacted their ability to save for retirement.
These pre-retirees also blame the impact of becoming unemployed (26%) or a significant drop in earnings (22%) for preventing them from saving enough.
The long-term financial gloom is felt across the world, with nearly a quarter (23%) of working age people expecting their standard of living in retirement to be worse than it is today.
Two thirds (66%) of pre-retirees worldwide are concerned about not having enough money to live on day-to-day in retirement, rising to 88% in Malaysia, 83% in Hong Kong and 81% in Brazil. Women are more concerned than men (71% vs. 62%).
One in ten (10%, rising to 16% in Australia) go so far as to predict that they will never be able to fully retire from paid employment.
Things are set to worsen. Over two fifths (45%) of working age people globally (rising to 62% in France and 58% in Singapore) say that the cost of living today is increasing faster than their income, and 28% around the world (47% in France) say they are less able to save money today than they were just one year ago.
Technical note
The Future of Retirement A balancing act was published in January 2015. It is the tenth in the series and represents the iews of more than 16,000 people in 15 countries and territories: Australia, Brazil, Canada, France, Hong Kong, India, Indonesia, Malaysia, Mexico, Singapore, Taiwan, Turkey, United Arab Emirates, United Kingdom and the United States.
The findings are based on an online poll conducted by Ipsos in August and September 2014.
