Dubai: Higher life expectancy and complex global macroeconomic conditions have set the young generation up for a number of challenges they need to overcome before they can hope for a comfortable retirement, according to a new research by HSBC.
While retirement planning is becoming increasingly complex for the millennials across the world, the study finds that this age group in the UAE suffers from a reality gap when it comes to comparing their retirement prospects and saving habits.
The HSBC study, The Future of Retirement: Shifting Sands’, a survey of 18,414 people across 16 countries and territories including 1,127 people in the UAE, provides insights into the key issues associated with the increasing life expectancy around the world and its impact on peoples’ retirement prospects.
The study finds that Millennials realise that their generation is facing unprecedented financial pressures but are not adequately prepared for this phase in later life. While 51 per cent of the survey respondents in the working age people across the country agree that Millennials have experienced weaker economic growth than previous generations, the perception in line with the global average of 53 per cent.
Requiring support
Despite the opportunities that a life in the UAE offers, working people are concerned about meeting their retirement goals due to a growing number of people requiring support during their retirement (53 per cent) and rising national debts in their home countries putting pressure on funds available to support the elderly (60 per cent).
“Our study shows that around two thirds of people in the UAE are aware that it will be more difficult to save for a comfortable retirement following the global financial crisis in 2007/2008. Therefore, it is not surprising to see that only 2 in 10 of people in the UAE think Millennials are in the best position for a comfortable retirement. Therefore, it is now more important than ever before to create a solid financial plan in order to secure a comfortable retirement,” said Matthew Colebrook, Head of Retail Banking and Wealth Management, Mena and Turkey, HSBC Bank Middle East Limited.
Data shows young generation of professionals, as many as 41 per cent of Millennials have not started saving for their retirement, compared to 35 per cent of Generation X (those born between 1966 and 1979) and 29 per cent of Baby Boomers (those born between 1945 and 1965). Whilst they are aware that global market conditions are not optimum, they have not shown the willingness to start saving early.
Around half of Millennials in the UAE agree they will live much longer and will need to support themselves for longer than previous generations. In fact, this generation is expected to cover for an average of 16 years of retirement, compared to 15 years for Generation X. Despite knowing this, Millennials express unrealistic aspirations to retire two years younger, at the age of 56, than other generations while having more years to cover for during their retirement.
Moving targets
The changes in the retirement landscape are forcing people to adjust their expectations for retirement. Based on how their retirement saving is progressing; only 44 per cent of working age people think they will be financially comfortable when retired.
Meanwhile, constant change is making it difficult to plan ahead, with 44 per cent of working age people believing things change so much that their retirement plan won’t be applicable by the time they retire and 38 per cent have not started saving for retirement. In light of this, 63 per cent of working age people say they will continue working to some extent in retirement while 79 per cent would be willing to defer their retirement for two years or more to have a better retirement income.
