Nine out of 10 people in India have seen their ability to save for retirement significantly affected by a life event, HSBCs 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
HSBCs 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 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.
