Britain's ‘Ostrich Generation' needs to wake up to pensions reality
A generation of Britons faces a cash-strapped retirement as people ignore or refuse to respond to the changing nature of pension provision in the UK, a new report from HSBC reveals.
Members of the UK's Ostrich Generation know they will live longer than previous generations and understand that traditional state and company pensions will no longer be so generous.
However, despite fears that they are under-prepared - and with expectations to ease into semi-retirement in their mid-50s before stopping work at 62 - the majority are not making any plans about how they'll fund their retirement.
This worrying scenario is revealed in a new HSBC report, The Future of Retirement: The power of planning, which lifts the lid on the parlous state of Britain's pensions and retirement preparations.
Compellingly, Britons who are not burying their head in the sand over retirement enjoy a significant financial and emotional premium. Those with a financial plan have retirement savings and investments worth over four times as much as non-planners, HSBC found, and higher expectations of a happy and exciting retirement.
For The Future of Retirement report, HSBC questioned 1000 working age Britons and found that half (49 per cent) expect to be worse off in retirement than their parents (just 27 per cent expect to be better off).
Nearly one in five (17 per cent) don't know what their main source of retirement income will be, with a further 21 per cent saying they will rely on the state pension.
Of those Britons expecting to be worse off than their parents in retirement, three in five say the major reasons are that state and company pensions are not as generous as for previous generations.
As a whole, 68 per cent of respondents are worried about coping financially and 48 per cent fear they are not saving enough for their retirement, rising to 57 per cent among women in their 30s and 40s.
But despite all this, slightly fewer than four in ten (39 per cent) Britons have put a financial plan in place to provide for their futures and 68 per cent are worried they are not financially prepared.
Through the report HSBC has identified four categories of financial preparedness:
Disengaged non-planners (35 per cent of the population) who are doing nothing, with the primary reason being a belief that they lack the necessary income.
Advice-seeking non-planners (25 per cent) do not have a plan but do take occasional financial advice.
Self-guided planners (13 per cent) have a plan in place but do not seek professional advice. Tend to be younger, mid to high income and internet savvy.
Advice-seeking planners (26 per cent) have a plan and take professional advice to help manage their finances.
Commenting on the findings, David Wells, head of investments, pensions & savings, HSBC Bank plc, said: "The emergence of this Ostrich Generation is a real concern. Britons know that they need to plan and save more for their retirement, yet are not turning this knowledge into action.
"People need to look around and take proper stock of what they need to do - they can no longer totally rely on the state or their employer to provide for them. In the 21st century it is all about taking individual responsibility.
"There is very good news for those who do plan - regardless of what they earn or how much or little they can afford. The very act of starting a plan and putting it into action today will reap significant financial and emotional rewards - a good plan now is far better than a perfect plan tomorrow."
The Future of Retirement is a long-running, world-leading study into global retirement and ageing issues which helps HSBC better understand the trends and consequences of ageing and retirement. The latest report, The power of planning, questioned over 17,000 people in 17 countries about retirement and financial planning.
The bank found firm evidence in the survey of a ‘planning premium' among respondents. Britons who have a financial plan have 2.3 times more than the UK average in their pension pot while non-planners have saved 47 per cent less.
Those Britons with plans have accumulated on average £123,000 in their savings and investments for retirement, compared to the average UK household of £53,000. Non-planners will have around £28,000.
Furthermore, in addition to the financial premium, those who plan enjoy an emotional one too, being more likely to associate retirement with freedom, excitement and hope. Strikingly, almost half (48 per cent) of non-planners link retirement to financial hardship, while this is a concern for just a quarter of planners (23 per cent).
For more information, visit hsbc.co.uk.