UAE. A ‘perfect storm’ of demographic, individual and financial elements is poised to derail people’s retirement plans unless they prepare properly now, a global survey from HSBC Insurance reveals today.

The fifth annual Future of Retirement study, titled 'It’s Time to Prepare', shows:

• People’s short-term survival strategies in the midst of recession are creating a serious long-term pensions ‘downturn deficit’
• There is a continuing lack of pensions planning, even though people are aware that they are likely to live longer
• This is being exacerbated by poor levels of financial understanding, education and access to advice
• People are more concerned with protecting their possessions in the short-term than ensuring they can look forward to a financially secure retirement.

The consequence of these combined factors is that many people will struggle to make ends meet when they come to retire, unless they urgently review their priorities and planning.

Stephen Green, Group Chairman of HSBC, said: “A perfect storm is confronting pensions planning, created by an ageing population, falling pension funds values, a drop in state and employer contributions and an economic downturn which is forcing people to make tough financial choices.”

'It’s Time to Prepare' has identified a ‘preparedness gap’ in people’s pensions planning across the world with nearly nine out of ten people not feeling fully prepared for their retirement.

The Future of Retirement survey questioned 15,000 people in 15 countries including the UAE, making it the largest study of its kind in the world.

How prepared is the UAE population? The results reveal:

• 87% of people do not have any idea about what their retirement income will look like (this is in line with the global average of 87%)
• 13% of people feel well prepared for retirement (this in line with the global average of 13%)
• Only 38% of people feel they understand their short-term finances very well
• Whilst 19% of people understand their long-term finances very well (lower than the global average of 27%)

In terms of preparing for retirement the UAE sample revealed:

• 29% of people are in favour of increasing the retirement age and supporting people to work longer (higher than the global average of 23%)
• Only 10% of people think that the government should raise taxes to pay for better state pensions and social security (compared to 13% globally)

Stephen Green continued: “The ‘preparedness gap’ reveals that families need greater support and guidance to effectively handle their finances, not simply in schools and colleges but through ‘trusted advisers’ providing professional financial guidance.

“If people prepare adequately for the long-term an extended later life can present a golden opportunity for many. But now is the time for people to seriously consider boosting their pensions contributions to improve their prospects of a comfortable retirement. The cost of procrastination is likely to be high.”

It’s Time to Prepare also reveals a parallel ‘advice gap’ linking a lack of preparedness to insufficient financial education and guidance:

• 62% have never accessed any form of general financial education (higher than the global average of 42%)
• While 51% have never sought any professional financial advice (higher than the global average of 46%)

Khalid Alkadi, Deputy Regional Head, Insurance, HSBC Bank Middle East, said: “Now more than ever people have to understand that effective planning is the key to financial security. The results show that this is an area clearly neglected in the UAE. Getting good financial planning from trained and trusted professionals will go a long way in helping people make intelligent money decisions and cope with retirement and old age requirements.”

People are paying little attention to long-term considerations such as their likely retirement needs, focusing instead on purely practical short-term concerns which they better understand, the report reveals.

General insurance solutions – motor, travel, home and even pet insurance – are seen as a greater priority than addressing longer-term needs around insuring health or income, even when job security is in question.

The Future of Retirement survey shows that, as a result of the economic downturn:

• 92% of people have changed some element of their finances
• Only 19% will now retire as planned
• 17% are reducing retirement savings or stopping saving for retirement altogether
• 18% have used savings to pay off debt
• 9% expect to delay their retirement

The UAE results reveal:

• Over 40% of people do not intend to make any changes to their finances (higher than global average of 21%)
• 6% of people have stopped paying into a pension (compared to 10% globally)
• 43% of people believe that the economic downturn will last one to two years. This is higher than the global average of 40%

Mark Twigg, Director at financial services consultancy Cicero Consulting, which undertook the survey for HSBC Insurance, said: “It’s Time to Prepare reveals the lack of understanding people have around their long-term retirement needs. They are less well educated or aware when trying to understand these needs and to act on them, than with their short-term requirements.

“As the economic ‘perfect storm’ threatens it is important that people are encouraged to understand long-term risks and to manage them effectively. While people are taking more responsibility for themselves, there is also a definite role for financial institutions to continue, and to build on, their work to educate and inform.”

MIDDLE EAST BUSINESS COMMENT & ANALYSIS

• Top news
• Business News
• Company News