People now expect to save for seven years longer than their predecessors for their retirement, according to new research from HSBC.

The report, Generations and journeys, the latest in HSBC’s long-running ‘The Future of Retirement’ series, reveals that working people feel under more pressure than ever to save for their retirement.

According to the research, based on the views of over 18,000 people in 17 countries, the current generation of retirees started saving for their retirement at 35 and retired at 58, saving for an average period of 23 years.

However, the report shows that working age people around the world now begin to save five years earlier, at age 30, and expect to retire two years later, at 60, meaning they face on average 30 years of retirement saving – seven years more than current retirees.

The gap is most marked in China (14 years), the UAE, (12) Australia (11) and France (11), where working people now expect to save for more than a decade longer than current retirees did. Indonesia is the only country surveyed where working age people expect to save for the same length of time as current retirees saved for.

Years saving for retirement (average)
	Years current retirees have saved	Years pre-retirees expect to save	Additional years pre-retirees expect to save
Average	23	30	7
China	9	23	14
UAE	13	25	12
Australia	26	37	11
France	24	35	11
Hong Kong	18	28	10
Argentina	24	33	9
Egypt	18	27	9
Singapore	20	29	9
Canada	26	34	8
Taiwan	16	24	8
UK	30	37	7
USA	28	35	7
India	20	26	6
Mexico	28	33	5
Malaysia	23	27	4
Indonesia	23	23	0

Despite beginning to save for retirement earlier, many working age people still don’t think they are saving enough. More than one in three (38%) wish they had started to save earlier, and 28% say they should have saved more by putting aside a larger share of income.

HSBC’s report also uncovers that nearly a quarter (24%) of working age people have still not started saving for their retirement, including 12% of those aged 60 or over.

Funding retirement

Pre-retirees around the world have different approaches towards how they will fund their retirement. Diminishing state support in most countries may be a contributing factor towards this, with just 30% of pre-retirees expecting to help fund their retirement through a state pension or social security, versus 45% of retirees who are currently doing so.

Findings from a previous Future of Retirement report[1] show that this loss of faith in state pensions has been going on for some time. In 2011, 45% of all respondents thought that their generation would be worse off in retirement because state pensions were not as generous as they used to be.

Some of the other common ways pre-retirees are likely to help fund their retirement include drawing on cash savings/deposits (42%), income from continuing to work to some extent (29%) and personal pension schemes (23%).

Aside from these more traditional ways of saving for retirement, working age people are also looking at alternative sources of funding, and the research reveals differences in their methods between countries.

Many pre-retirees are looking at using property for additional retirement income. Over one in ten working age people (12%) say that downsizing and/or selling a property will help them to fund their retirement, and this is particularly prevalent in Australia (26%) and the UK (22%).

This compares to just 6% of existing retirees globally who are using income from downsizing or selling a property to help fund their retirement.

In contrast, in Asia and the Middle East, support from family is expected to be a common way for pre-retirees to help fund their retirement –  particularly in India (15%), Singapore (15%), Hong Kong (14%) and the UAE (14%). Globally, nearly one in ten (9%) working age people believe that financial support from their children will help fund their retirement.

Charlie Nunn, Group Head of Wealth Management comments:

“People recognise that they are living longer and may not be able to rely solely on more traditional forms of funding for their retirement, including state provision. As a result, they are realising they need to start saving for retirement earlier than previous generations and to consider alternative methods to help fund their retirement. Even small amounts set aside today can go a long way to helping fund a comfortable retirement in the future.”

Practical steps

HSBC’s research identified four actions that people can take to improve their financial well-being in retirement:

1. Consider all your retirement expenses

When planning for retirement, make sure to list all your possible retirement outgoings

2. Start saving earlier for retirement

Plan to start saving for retirement earlier, to help build a bigger fund and allow it to grow for longer

3. Make sure your advice is professional

Seek information from many sources, but make sure the advice you get is professional

4. Be prepared for financial ups and downs

When saving for retirement gets difficult, make sure to review all your finances and seek alternative ways to help you continue towards a comfortable retirement

[1] The Future of Retirement: The power of planning report 2011, page 18