The latest instalment of HSBC’s report into the future of retirement states that lack of savings, debt and healthcare are among a host of concerns shared by many approaching later life.
The headline statistic from the report entitled: The Future of Retirement Healthy New Beginnings, which features the views of more than 18,000 people in 17 countries, is that three quarters of people aged 45 and over would like to retire in the next five years, but almost half – 45 per cent – of those cannot fulfil this aim because their circumstances do not permit it.
In addition, the document revealed that the number of people who fear they may never be able to fully retire has increased in the last year – up 2 percentage points to 12 per cent.
Freedom to travel or pursue other interests, the detrimental effect of work on physical and mental health and a desire to spend more time with the family were among a list of popular reasons cited by those aged 45 and over for wanting to retire in the next five years.
The main barrier to retirement is financial, according to the report, with 74 per cent of respondents stating they have not saved enough. What is more, 19 per cent said they have dependents who rely on their income, while 18 per cent admitted to having a lot of debt.
Caroline Connellan, head of UK wealth at HSBC, said: “Modern financial pressures and the changes in pension freedoms make the need for sound financial planning more important than ever. Even small amounts saved today can make a difference.”
Matthew Walne, managing director of Leicestershire-based Santorini Financial Planning, agreed, adding: “I think the problem over the lack of retirement savings is only going to get worse in the future. The baby-boomer generation inherited a savings culture from the parents who had to endure testing times during the Second World War. We now live in a society where emphasis is put on spending rather than accumulating for retirement.
“We have got to a point where instead of inheriting money, many people will inherit debt.”
Healthcare appears to be another significant obstacle. Seventy per cent and 58 per cent of pre-pensioners stated that poor health and their partner becoming ill respectively will make saving for their retirement more difficult .
Jeremy Edwards, associate partner and IFA at Martin-Redman Partners, said: “Very few people make enough provision for healthcare in their retirement savings because there is that expectation that the state will provide it, and I am not sure that this will be the case. The Care Bill explored the prospect of placing a cap on the amount one person can spend on care in their lifetime, but this has been pushed back.
“A lot of people do not understand that long-term care is operated by local authorities. Many of these authorities are strapped for cash, and I would not be surprised if long-term care takes a hit as part of a cost-cutting exercise.”
Caring for elderly parents, the death of a spouse and getting divorced are among some of the more notable concerns identified in the report.
However, fewer than 16 per cent of pensioners cited these reasons as barriers to retirement saving – while fewer than 6 per cent came to the same conclusion when it came to caring for elderly parents and the death of a partner.
The life events that had more of an impact on their retirement savings were buying a home, having children, and getting married.
In addition, 45 per cent of working age people in the sample said they have either needed full-time care themselves or have known someone who has.
These individuals had greater concerns about their ability to care for themselves, their mobility, comfort and financial wellbeing compared to those who have not experienced full-time care, according to the report.
Peter Chadborn, director of Essex-based intermediary Plan Money, said: “We have all had different experiences when it comes to healthcare. If someone has benefited from healthcare through their workplace, for example, then that individual is more likely to be keen to replace that service at retirement than someone who hasn’t.”
In all, 79 per cent said they could not predict how much they are likely to spend on medical arrangements – including almost three quarters of those living in households with an annual income of more than £50,000.
In addition, a higher proportion of women were unable to predict their healthcare expenditure in retirement, compared to men, the report found
The findings also showed that pensioners are trumping pre-pensioners when it comes to reducing the risk of poor health in the future. There was a greater proportion of pensioners who said they eat a healthy diet, are physically active and have regular medical check-ups.
For Mr Walne, the main barrier to those who want to retire is fear of boredom.
He said: “Money and healthcare are both major barriers, but I think many people are simply scared of having nothing to do once they’ve packed in their job. I find that men in particular are reluctant to leave their roles and are happier to keep going indefinitely if their health permits it.”
The report outlined four practical steps to help people prepare for retirement.
The first two relate to the financial barrier. People should start saving for retirement early to ensure they have a greater chance of retiring when they want to.
Practical steps three and four centre on the topic of healthcare. The former involves leading a healthy lifestyle pre-retirement and maintaining it thereafter. The latter requires individuals to consider how their healthcare needs may change at retirement.
Mr Walne said: “Auto-enrolment is forcing people to save, but for most people, the savings are not going to be enough. You have to find some way of changing people’s mentality and attitude to saving overnight. It is one thing identifying the problem, but it is even more difficult to identify the solution.
The report findings also showed that working age people believe that many aspects of their lives will improve at retirement. Nearly 40 per cent expect their social life to be augmented.
Meanwhile, just over a quarter of respondents stated that they expect their relationship with their children and grandchildren to develop, and 21 per cent said they are likely to develop strong ties with their spouse or partner.
These sentiments appeared greater among women than men.
In contrast, 26 per cent expect their standard of living to worsen at retirement, as opposed to the 24 per cent who said it would get better.
However, in contrast, pensioners who took part in the survey claimed that many aspects of their lives had indeed been improved – more notably their social life, standard of living and relationship with their other half.
Mr Chadborn said: “Everyone has their own expectations of retirement, but whether these expectations are met is another story and on a case-by-case basis. Many people think they would be happier in employment while other use retirement as an opportunity to fulfil longstanding aims and desires.”
Myron Jobson is a feature writer at Financial Adviser
Key points
The number of people who fear they may never be able to fully retire has increased in the last year.
Pensioners are trumping pre-pensioners when it comes to reducing the risk of poor health in the future.
Working age people believe that many aspects of their lives will improve at retirement.
