•HSBC survey highlights that working age people in the UAE expect retirement to last 16 years, but savings to last only 12 years
•Almost half (46%) are either not currently saving for their retirement or do not intend to start
•More than two in five (46%) say that their income is not keeping pace with the cost of living
Dubai - The majority of residents in the UAE are facing the prospect of a shortfall in their retirement savings as major life events and the high cost of living are holding them back from preparing for life after work. HSBC's The Future of Retirement 2015 report reveals that for nearly 9 in 10 (87%) people in the country, saving for retirement is not a main priority. As a result of which, more than half (55%) of the working age population feels inadequately prepared for life after work as they did not start saving early enough; the highest proportion globally to express this sentiment.
The Future of Retirement: A balancing act, a survey of more than 16,000 people across 15 markets and more than 1,000 in the UAE, assesses retirement trends globally and identifies the key issues people have to deal with in their lives after work. This year's research shows that people the world over are facing the prospect of a less comfortable retirement than they might have previously anticipated, with over two-thirds (71%) of pre-retirees in the UAE worrying about having enough money to live day-to-day and 68% fearing that they will run out of money after they stop working. Additionally, nearly one in ten working age people (8%) in the country believe that they will never be able to fully retire.
A distant priority
As people in the UAE are juggling a number of priorities, it is evident that preparing for retirement is not amongst their most pressing concerns. Paying off debts (34%) and saving for children's education (28%) are cited as more urgent financial commitments, while only 13% of working age people in the UAE believe saving for retirement is their main priority. These attitudes are mirrored globally with a majority (85%) stating that preparing for retirement is not their main concern.
HSBC's research shows that even though people realise the need to start preparing for this phase, certain life events are holding them back from doing so, with over four in five (83%) in the UAE expressing this sentiment. While the country has moved beyond the financial crisis, people are still facing its lingering effects. 23% of pre-retirees described the global economic downturn and its related effects, such as becoming unemployed (23%) and experiencing a significant drop in earnings (18%), as having a significant impact on their ability to prepare for retirement. Other unforeseeable life events including an illness or accident that prevented people from working was cited by 15% of pre-retirees.
Commenting on the impact of these life events, Gifford Nakajima, Head of Wealth Development, UAE and MENA, HSBC Bank Middle East Limited, said: "While certain events cannot be anticipated, others that are in fact cited more often by working age people as having an impact on their ability to save for retirement, such as buying a home/paying a mortgage (37%), paying for children's education (29%), or starting a family (18%), can be planned for more proactively. For instance, our research shows us that only 1% of parents fund their children's education through specific education plans.
"If people start saving early enough and develop a sustainable financial plan that they can commit to, they will be able to cope with most of the major life events while preparing for retirement, but our research shows that planning for this stage of life is increasingly being postponed."
When is late, too late? A ticking time-bomb
Worldwide, two in five (38%) retirees say that you need to start planning by the age of 30 at the latest to maintain your standard of living in retirement. While this perception is the highest in countries like UK (62%), Australia (57%) and the US (47%), where there is a greater societal focus on preparing for life after work, this is a far less commonly held perception among working age people in the UAE (20%). Instead, almost two in five (38%) here say that you can wait until you are age 41 or older.
Nakajima added: "Worryingly, almost half (46%) of pre-retirees are either not currently saving or do not intend to start saving for retirement. Even among those closer to retirement - aged 45 and over - more than a third (35%) are following this trend. As a result, the majority of working age people are not able to save enough to last them through their retirement. Pre-retirees who are not saving may regret not starting sooner, as globally, almost two thirds (65%) of retirees who failed to save enough did not realise this until it was too late."
On average, pre-retirees expect their funds (excluding pensions) to run out 12 years into retirement, although this period of life is expected to last 16 years, creating an alarming 4 year shortfall. Additionally, since retirement planning is either being left too late or not being done at all, it is not surprising that people in the UAE are the highest globally to say that they are not prepared for life after work as they did not start saving early enough. 55% of working age people express this sentiment, far higher than the global average of 38%.
Developing a plan early
Even though almost two-thirds (64%) feel more confident about their future financial prospects than a year ago - much higher than the global standard (48%) - almost half (46%) say that their income is not keeping up with the surging cost of living in the country. As a result, 23% of working age people say that their ability to save has fallen, while just 13% state that their ability to save has increased compared to a year ago. This sentiment was reiterated in HSBC's Expat Explorer 2014 survey, in which six out of ten expats stated that they would consider moving away from the country because it was becoming too expensive.
Khalid Elgibaly, Head of Retail Banking and Wealth Management, UAE and MENA, HSBC Bank Middle East Limited, said: "Alarmingly, we see that in addition to rising costs and life events, a lack of understanding about how much to save is also hindering people's ability to prepare for retirement, with one in five (20%) citing this as a barrier to their plans. People looking to understand how much they need to put aside need to first look at how long they expect their retirement to last and what standard of living they want to maintain. It is then critical to start saving as soon as possible; even if it is a little each month, this can reap significant dividends in the long-term. Meanwhile, speaking with financial advisors can also help working age people make investments commensurate with their financial situation and risk appetite."
HSBC's research shows that saving regularly and investing early produces results. If an individual starting at age 35 invests USD 1,250 a month for 25 years, their final retirement pot can add up to over USD 855,000 with premiums totalling USD 375,000. However, if an individual starts saving at age 45 and puts aside the same amount each month for 15 years, their final retirement pot will be less than USD 360,000 with premiums totalling USD 225,000.
Elgibaly added: "Retirement can mean different things to different people. While some may view this as a time to relax after a lifetime of work and spend time with their families, others may choose to use this as an opportunity to experience things they never had a chance to when they were younger. Whatever their aspirations, developing a long-term financial plan will go miles in helping working age people maintain a comfortable standard of living in retirement."
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About HSBC
The Future of Retirement is a world-leading independent research study into global retirement trends, commissioned by HSBC. It provides authoritative insights into the key issues associated with ageing populations and increasing life expectancy around the world. This global report, A balancing act, is the tenth in the series and represents the views of more than 16,000 people in 15 countries and territories worldwide (Australia, Brazil, Canada, France, Hong Kong, India, Indonesia, Malaysia, Mexico, Singapore, Taiwan, Turkey, United Arab Emirates, United Kingdom, United States). The findings are based on an online poll conducted by Ipsos MORI in August and September 2014. Since The Future of Retirement programme began in 2005, more than 141,000 people worldwide have been surveyed.
HSBC Holdings plc, the parent company of the HSBC Group, is headquartered in London. The Group serves customers worldwide from over 6,200 offices in 74 countries and territories in Europe, Asia, North and Latin America, and the Middle East and North Africa. With assets of US$2,729bn at 30 September 2014, HSBC 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.
About HSBC in the MENA Region
HSBC is the largest and most widely represented international banking organisation in the Middle East and North Africa (MENA), with a presence in 11 countries across the region. HSBC has operations in the United Arab Emirates, Egypt, Qatar, Oman, Bahrain, Kuwait, Lebanon, Algeria and the Palestinian Autonomous Area. In Saudi Arabia, HSBC is a 40% shareholder of Saudi British Bank (SABB), and a 49% shareholder of HSBC Saudi Arabia for investment banking in the Kingdom. HSBC also maintains a representative office in Libya.
This presence, the widest reach of any bank in the region, comprises some 267 offices and around 12,000 employees. In the first half of 2014, HSBC in the MENA region made a profit before tax of US$989m.
Media enquiries to:
Farah Farooq +971 56 6867337 farah.farooq@hsbc.com
Natasha Singh +971 569 936 903 natasha.singh@hsbc.com
Ahmad Othman +971 50 3069313 ahmad.othman@hsbc.com
© Press Release 2015
