Nine out of 10 people in India have seen their ability to save for retirement significantly affected by a life event, HSBC’s latest global The Future of Retirement study reveals.
The Future of Retirement - A New Reality report, based on a survey of over 15000 consumers in 15 markets aims to find out people’s retirement needs and how they are preparing for it. The India report further pointed out: 29% of non-retired people are not preparing adequately or at all for a comfortable retirement (compared with 56% globally), of which 10% (compared to 18% globally) expect they will never make up the shortfall.
It shows that these people, 90% of the working age population in India, have been affected by events such as falling into debt, losing their job or the economic downturn. The event with the greatest impact stops retirement saving for an average of four years, resulting in an average retirement potential loss of upto INR 600,096 for a man and upto INR 509,376 for a woman
The study found out, a quarter -26% of people in India (compared to 26% globally) have had their ability to save for retirement significantly impacted by the economic downturn. Of all those affected by the slowdown, 13% (compared to 28% globally) have had to stop all their savings for retirement.
Gannesh Bharadhwaj, Head Retail Banking & Wealth Management, HSBC India, said “Just a year or two without saving can have a significant impact on your future income in retirement. When the economic downturn first hit and many people reduced or stopped saving, everyone expected the storm would eventually pass; but today’s shifting economic and social trends require people to think differently about their planning and prepare for the unexpected. Having a financial plan in place (whether informal, or better still formal) will on average result in greater retirement savings”
A need to prioritise the ‘here and now’ is one of the most troubling signs of economic woes. A third (31%) of those in India who have never saved for retirement blaming the cost of day-to-day living expenses (compared to 44% globally). When asked to choose between saving for the short term goal of a holiday and the longer term goal of retirement, Indian respondents were the joint least likely to choose for a holiday, with only 35% doing so. Over three-fifths (61%) said they would rather save for the retirement.
The study also showed how retirement savings are vulnerable to being raided to deal with serious financial hardship resulting from unforeseen life events, with 35% of pre-retirement Indian respondents (compared to 29% globally) admitting they would consider dipping into their retirement pot to cope with life events such as buying a home or paying for children’s education
The findings are described by HSBC as a time-bomb which would leave millions of people facing reduced standard of living in later life.
Meanwhile a loss of confidence in the face of economic uncertainty may have prompted people to put their retirement savings into cash deposits, in turn threatening to further stunt the potential growth of people’s retirement pots. More than half of non-retired people in India (59%) expect cash savings or deposit accounts to be part of their retirement fund (49% globally) compared to 36% (21% globally) in stocks and shares
HSBC’s research identified five actions that individuals can take to improve their financial well-being in retirement.
Action 1: Get real about your retirement needs
By thinking realistically about your future aspirations and needs, from foreign travel to healthcare costs, you will be able to better understand how much income you will need in retirement and how to best prepare for all the financial risks associated with growing older.
Action 2: Put your savings priorities in order
Work out a realistic budget that works for you and make sure that your long-term financial planning, including the need to save for retirement, isn’t overlooked against what might seem like more pressing financial needs. Ring-fencing even a small amount of monthly income towards retirement planning can help to make a major difference in the future.
Action 3: Be aware of how major life events affect saving for retirement
You never know when a life event may impact your savings, so where possible, you need to ensure that you have access to some emergency savings and investments as well as appropriate cover to deal with periods of unemployment and long-term illness which may prevent you from working.
Action 4: Make a plan for the future
Any type of financial planning for retirement, including informal ways such as using online planning tools or ‘to-do’ lists, is a good starting point. Eventually you should seek to draw up a detailed written plan for the future, which should be reviewed regularly.
Action 5: Use professional advice to improve your savings position
Reviewing your savings situation and retirement potential with a professional financial adviser now can help to ensure that all your future retirement needs are identified and that comprehensive plans are put in place.
About the HSBC Future Of Retirement Programme
HSBC’s The Future of Retirement programme is a world-leading independent study into global retirement trends. It provides authoritative insights into the key issues associated with ageing populations and increasing life expectancy around the world. The latest global report, A new reality, is the eighth in the series and is based on an online survey of 15,866 people in 15 countries. The survey covered more than 15,000 people in 15 markets worldwide, including Australia, China, Hong Kong, India, Malaysia, Singapore and Taiwan in Asia, as well as UAE, Egypt, UK, France, US, Canada, Mexico and Brazil. Since The Future of Retirement programme began in 2005, more than 125,000 people worldwide have been surveyed.The India country report was based on the views of over 1,058 respondents in India
HSBC Holdings plc, the parent company of the HSBC Group, is headquartered in London. The Group serves customers worldwide from around 6,900 offices in over 80 countries and territories in Europe, the Asia-Pacific region, North and Latin America, the Middle East and Africa. With assets of US$2,721bn at 30 September 2012, the HSBC Group is one of the world's largest banking and financial services organisations.
For more information about The Future of Retirement, and to view all previous global and country reports, visit www.hsbc.com/retirement.
Cicero Consulting is a leading consultancy firm serving the banking, insurance and asset management sector, Cicero specialises in public policy consulting as well as global thought leadership and independent market research. Cicero was established in 2001 and now operates from offices in London, Brussels, Washington and Singapore. Visit www.cicero-group.com.
As a market leader in pensions and retirement research, Cicero designed and analysed the research and wrote this report, with Mark Twigg as author and Paul Middleton as research director.
