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The Future of RetirementShifting sandsChinaThe FutureFutureofReportRetirementof RetirementShiftingShiftingsandssands

ForewordThe changingretirementlandscapePractical stepsThe Future of Retirement Shifting sandsKey findingsPlanning forretirement ina volatile ageMillennials andretirementRetirement 2.0The research2

ForewordWe live in interesting times. Unprecedented political, social,economic and technological change means it has never beenmore challenging or more important to save for a goodretirement.Our latest report in The Future of Retirement series, Shiftingsands, looks at how important issues like the ageingpopulation, rising healthcare costs and long term low interestrates are affecting the retirement plans of people around theworld.The report investigates how people are making sacrifices,exploring new sources of funding and adjusting their retirementexpectations for a world that is very different even to that of tenyears ago.I hope that the new insights and practical steps in this reportwill help you to plan for the best possible retirement.Charlie NunnGroup Head of Wealth Management, HSBCThe Future of Retirement Shifting sands3

Key findings56%84%31%of working age people think lowinterest rates mean they will need towork for longerof working age people believeretirees will have to spend more onhealthcare costs in the futureof working age people think they willbe financially comfortable inretirement, based on how theirretirement saving is progressing58%23%12%of working age people say they willcontinue working to some extent inretirementof working age people thinkproperty offers the best returns forretirement savingof people think Millennials are in thebest position for a comfortableretirement, compared to 42% whothink Baby Boomers areRead moreThe Future of Retirement Shifting sands4

Key findings285866%is the average age Millennialsstarted saving for retirementis the average age Millennialsexpect to retireof people believe that Millennials arepaying for the economic consequencesof previous generations77%78%of working age people believe newtechnology makes saving forretirement easierof working age people believe newtechnology will help give futureretirees a better standard of livingThe Future of Retirement Shifting sands5

The changingretirementlandscapeFutureTheFutureof Retirementof RetirementShiftingShiftingsandssands6

The challenge ofplanningSeventy-one percent of working age people say it will bemore difficult to save for a comfortable retirement followingthe financial crisis of 2007/8. Almost two-thirds (65%) areconcerned about whether their employer pension scheme(s)will be able to pay out in full.‘Lower for longer’ interest rates are also making it harder tosave for a comfortable retirement. Over half (56%) ofworking age people think low interest rates will mean theywill need to work for longer (compared to the global averageof 50%), while 57% say they need interest rates to rise ifthey are to save enough to be comfortable in retirement.56%of working age peoplethink low interest ratesmean they will need towork for longerThe Future of Retirement Shifting sands7

15278A19231AHealth chequeThe rising cost of healthcare is another important issue.Seventy-three percent of working age people areconcerned about it, Millennials (76%) more so than BabyBoomers (63%).Eighty-four percent of working age people believe thatretirees will have to spend more on healthcare costs in thefuture, and 70% are concerned about being able to fundtheir healthcare.25178A89%of working agepeople areconcerned aboutbeing able to fundtheir healthcareThe Future of Retirement Shifting sands19123A8

Planning forretirementFutureTheFutureof Retirementof RetirementShiftingShiftingsandssands9

Retirement expectationsThe changes in the retirement landscape mean people areadjusting their expectations for retirement. Based on howtheir retirement saving is progressing, 31% of working agepeople think they will be financially comfortable whenretired.Meanwhile, constant change is making it difficult to planahead, with 54% of working age people believing thingschange so much that their retirement plan won't beapplicable by the time they retire. Twenty-one percenthave not started saving for retirement.In light of this, 58% of working age people say they willcontinue working to some extent in retirement. Seventypercent would be willing to defer their retirement for twoyears or more to have a better retirement income. Fortythree percent would work for longer or get a second job tosustain their saving for retirement.58%of working agepeople say they willcontinue working tosome extent inretirementThe Future of Retirement Shifting sands10

Length of retirementOn average, working age people expect to retire at age 59,compared to the global average 61, and expect to live toage 83 (global average 81), resulting in a retirement of 24years, compared to the global average 20.There is very little variation between generations’expectations of when they will retire and how long they willlive. Millennials expect to retire at age 58, Generation X at58 and Baby Boomers at 61. Millennials expect to live toage 83, while Generation X expect to live to 84 and BabyBoomers to 85, resulting in expected retirements of 25, 26and 24 years respectively.The Future of Retirement Shifting sands59is the averageage working agepeople expect toretire12

Funding retirementCash savings are viewed as offering the best returns forretirement savingCash savingsProperty is not viewed as a good way of saving forretirement, with 23% of working age people thinking itdelivers the best returns (compared to the global average of47%). This compares to 50% for cash savings, 49% forpersonal pension schemes, 40% for stock/shares and 35%for employer pension schemes.This is reflected in future retirement plans, with only 5% ofworking age people expecting property to help fund theirretirement. Fifty-six percent expect employer pensionschemes to be a source of funding, cash savings 47%,personal pension schemes 46% and stocks and shares30%.50%Personal pension scheme49%Stocks and shares40%Employer pension scheme(s)35%Government/corporate bonds24%Property23%Buying a business6%Foreign currency5%The Future of Retirement Shifting sandsQ. Which of the following do you think offers the best returns for retirement saving?(Base: Working age people)12

Risk appetiteWith interest rates at historic lows, 67% of working agepeople think they will need to move their money fromsavings into investments and 79% actively move theirmoney around to get the best return/deal.There is a high appetite for risk, with 61% of working agepeople being very willing to make risky investments toensure their financial stability and 46% being willing to riskfinancial losses.79%of working agepeople activelymove their moneyaround to get thebest return/dealSeventy-nine percent of working age people say theyactively seek information to guide their financial decisions.The Future of Retirement Shifting sands14

Millennials &retirementFutureTheFutureof Retirementof RetirementShiftingShiftingsandssands14

A perfect stormThe economic challenges facing the Millennial generation(those born between 1980 and 1997) are starkly reflected intheir retirement prospects.Forty-nine percent of people believe that Millennials haveexperienced weaker economic growth than previousgenerations, while 66% agree that Millennials are paying forthe economic consequences of older generations, such asthe global financial crisis and rising national debt. Inaddition, 38% of people believe that employer pensionschemes may go bust or be unable to pay out to Millennials.However, 67% of people say that Millennials don’t know howgood they have it, enjoying a better quality of life than anygeneration before them.The Future of Retirement Shifting sands49%of people think Millennials haveexperienced weaker economicgrowth than previous generations15

Retirement prospectsExpected length of retirementAverageWhen it comes to retirement, Millennials are seen as lessfortunate than previous generations. Only 12% of peoplethink Millennials are in the best position for a comfortableretirement, compared to 42% who think Baby Boomers are.In terms of life expectancy and retirement planning, 65% ofpeople – 61% of Millennials themselves and 72% of BabyBoomers – believe the Millennial generation will live muchlonger and will need to support themselves for longer.5983Millennials5883Generation X5884Baby Boomers6185Age expect to retireAge expect to live toQ. What age do you expect to retire? Q. What age do you expect to live to?(Base: Working age people)The Future of Retirement Shifting sands16

Taking actionOn average, Millennials started saving for retirement at age28. However, 25% of Millennials have not yet started savingfor retirement, compared to 17% of Generation X and 9% ofBaby Boomers.39%of Millennials are preparedto cut back on theirexpenses in orderto saveWith 76% of Millennials concerned about running out ofmoney affecting their retirement, 39% are prepared to cutback on their present expenses in order to save, comparedto 30% of Generation X and 28% of Baby Boomers. Sixtyfour percent of Millennials see saving as a difficult butnecessary task (Generation X 61%, Baby Boomers 58%).Millennials and Generation X are more likely to takeinvestment risks than Baby Boomers. Sixty-two percent ofMillennials and 63% of Generation X are very willing tomake risky investments to ensure their financial stability,which is higher than Baby Boomers (50%).Eighty-one percent of Millennials actively seek informationto guide their financial decisions, as do 77% of Generation Xand 74% of Baby Boomers.The Future of Retirement Shifting sands18

Defining the generationsBaby BoomersGeneration XMillennialsBorn 1945 to 1965Born 1966 to 1979Born 1980 to 1997WAR D.ENDE1960sUS Civil Rightsmovement1945End of WWII1989Fall of Berlin Wall1960sKIN GMA RTIN LUT HER1953Discoveryof DNA1957European CommonMarket establishedThe Future of Retirement Shifting sands1969Woodstockfestival1969Moon landing1991Launch ofInternet1997First HarryPotter book18

Retirement 2.0FutureTheFutureof Retirementof RetirementShiftingShiftingsandssands19

Saving time and moneyTechnology is changing the way people save for retirement.How new technologies help people plan for retirementPut money into an online saving account46%43%Seventy-seven percent of working age people agree thatnew technology makes it easier to save for their retirement.People are using new technology in different ways to planfor and manage their retirement.Researched options on the internet47%33%Received robotic financial advice29%38%Spoke to an adviser online e.g. live chat28%16%Used a retirement planning app23%13%Used an online retirement calculator22%11%Working age peopleThe Future of Retirement Shifting sandsRetireesQ. What role, if any, has new technology played in helping you plan for yourretirement? (Base: All)20

Stay connectedThe role of technology in retirementHelps me stay connected with family and friendsAdditionally, over three-quarters (78%) of working agepeople believe that new technology will help give futureretirees a better standard of living.86%88%Monitors and maintains my healthPeople are using or think they will use new technologies indifferent ways in retirement.84%81%Helps me stay active and mobile83%83%Helps me to continue working67%Working age people79%RetireesQ. Do you think you will use/are you using any of the following new technologies inyour retirement? (Base: All)The Future of Retirement Shifting sands21

Practical stepsHere are some important insights and practical actions drawn from the research findings, which mayhelp today’s retirement savers plan a better financial future for themselves.Be realisticabout yourretirementThe Future of Retirement Shifting sandsConsiderdifferentsourcesof fundingPlan for theunexpectedTakeadvantage oftechnology22