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Summary: retirement saving expectations across the globe

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Summary: retirement saving expectations across the globe

Keys to success

Context differs across the UK, USA and Australia, but there are also common factors across all three. Here we pick out three key summary areas, along with deeper insights from respondents across the globe.

Our research highlights a large ‘service gap’ across all regions. In particular three ‘keys to success’ are illustrated, to provide successfully for those reaching retirement today and into the future. 

1. Bridge the advice gap

People need guided help and support to navigate how they access their retirement savings. While they now have to take more responsibility for funding their own retirement, many people are either not seeking advice or not finding it in the places they expect. Many people do not fully understand their options at retirement. There is a clear opportunity for retirement plan providers to offer people the personalised approach to retirement that they seek. 

2. Traditional retirement is over  

Retirement has become more of a process than a singular event, and many people expect to continue to work part-time in retirement. The default ‘cliff edge’ to retirement simply no longer exists, with many expecting the ‘advice’ or ‘guidance’ needed to ensure they fund their lifestyle to maximise enjoyment and minimise worry from the point they begin accessing funds, through the rest of their lives, while avoiding running out of money.

3. Control, flexibility, online by default 

Savers assume that any help will be available online. Just as banking and retail has moved online, they expect to be able to manage their retirement funds via their computer or phone, too, with real-time information on their status and the ability to make instant decisions on their funds. Additionally, there is an expectation that the provider will play a key role in providing this support digitally.

Global insights

Alongside the three key factors, respondents provided a range of findings at odds with how much of the retirement saving and spending ecosystem functions today.

Financial concerns

Most savers have financial concerns when they think about retirement.

  • They worry about whether they will be able to afford the lifestyle they would like to have in retirement (47%).
  • Health costs are a particular concern in the USA and Australia, showing the impact a country’s support system can have on retirement.
  • Retirement is a multi-staged event (45%), with a heightened feeling of this among those aged over 55 (49%).
  • Most (73%) expect to begin accessing retirement savings between the ages of 50 and 69, but a significant proportion (27%) fall outside this.

Limited lifestyle and healthcare costs are the top concerns in global retirement – Future of Global Retirement Report 2021 – smart.co

Funding retirement

In previous years, many savers had defined benefit pensions and retirement savings plans, providing a guaranteed income in retirement. The move to defined contribution means many now plan to rely on a combination of funds, including continued work, to finance ‘retirement’.
  • People expect to fund their retirement using a combination of funds including their private pension plans (41%), personal savings (41%) and the state pension (36%). 
  • Just under a third (31%) also anticipate funding their retirement using other income from some form of employment continued into retirement. Where the literal meaning of retirement means to ‘cease work’, this presents something of an oxymoron, to the extent that some may say almost a third of respondents expect they will not retire in the traditional sense. 
  • Those living in the UK are far more likely to think they will fund their retirement via thestate pension and a private pension plan than those living in the USA or Australia, where it isanticipated a variety of funding will be required.

The advice assumptions and needs and the huge gap

Although default solutions have increased pension savings, they have left many people with insufficient knowledge or understanding to make important decisions at retirement. Our research also confirms that a one-size-fits-all approach for delivering retirement incomes no longer exists, with a variety of options now required.
  • Half (47%) say they do not understand or do not know if they understand their options around finance at retirement. 
  • One in five do not even know how they will access their retirement savings (22%).

In terms of how people intend to access their retirement savings there is no clear option, with people wanting a variety of options. 

  • One in five want to receive a guaranteed income (21%) or a regular income for a specific number of years (19%). Others want to keep the full amount invested and use interest/investment to pay for their retirement (17%).
  • Understanding is lowest in the UK (46%), but higher in Australia (56%) and the USA (69%)

British future retirees are much more likely to rely on the state pension – Future of Global Retirement Report 2021 - smart.co

Most people want some level of support to help them manage retirement finances. With the growing reliance on online solutions, especially since the pandemic, many expect support provided to be from their provider using online mechanisms:

  • Half (51%) want some support.
  • 42% want some assistance but to remain involved. 
  • 9% want someone else to manage their retirement finances entirely

There is little evidence that many currently use the advice of financial advisers. Despite this, respondents expect advice and guidance. 

  • Many (47%) expect to be able to get advice regarding their finances during retirement from a financial adviser. 
  • A significant proportion expect to be able to get ‘advice’ direct from a pension provider(40%).

Online by default 

Most people (68%) believe it is important for them to be able to manage their retirement finances online and, looking at decision-making as opposed to ‘management’, most (72%) expect their provider to have online tools to help them make decisions about their finances during retirement.

In a market where many still receive a single paper statement annually from their retirement savings provider, it is clear that a huge gap exists between the expectations of savers and the technology competencies of many providers.

Solely or with support were the clear preferences when it came to retirement finance management in 2021 - Future of Global Retirement Report 2021 - smart.co