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Investment behaviour post-pandemic – the retirement outlook

3 months ago

The Global Investor Study 2021 – Schroders

The pandemic has not only had an effect on people's investment and savings behaviour but also on their retirement outlook.
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Retired people’s attitudes towards their retirement savings in the wake of COVID-19

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We can see how financial wellbeing and personal finances have become front and centre in the minds of so many over the past year. The majority (58%) of retired people are more cautious with spending their retirement savings due to the pandemic. 30% are as cautious as before, while 12% have been made less cautious by the events.

This sentiment is echoed across regions albeit to varying degrees. While only 50% of retired people in Europe are now more cautious with their retirement savings, 64% of retired people in the Americas feel this way, as do 63% of people in Asia and 61% across South Africa, Australia and the UAE.

Perhaps surprisingly, there was little difference across different levels of investment expertise. Expert/advanced investors were only 6% more likely (15%) to feel less cautious with spending their savings than beginner/rudimentary investors (9%).

While the majority of retired people (62%) say that they would’ve retired at the same age regardless of COVID-19, a significant minority (21%) say that if they’d known, they would have retired earlier.

Retired people’s thoughts on the age they retired in light of COVID-19

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Retired people’s thoughts on the age they retired in light of COVID-19, across regions

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Looking across regions, this sentiment is representative but with slight nuances. For instance, retired people in Asia would have retired earlier, had they known about the events of 2020 (23%). 20% of retired people in Europe and the Americas respectively and 17% across the UAE, Australia and South Africa (Other) would have also retired sooner.

Also of note is that when looking at investment knowledge group, expert/advanced retired investors are almost two times more likely to have retired later (21%) than their beginner/rudimentary counterparts (11%) had they known about the pandemic.

When looking at how the pandemic has affected non-retired people’s views on retirement planning, it’s clear that it has had a significant impact. 67% of people would now like to save more for their retirement, following the events of COVID-19. 21% of non-retired people would like to save the same amount while only 13% would like to save less.

Non-retired people’s attitudes towards their retirement savings in the wake of COVID-19

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Non-retired people’s attitudes towards their retirement savings in the wake of COVID-19, by age

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This desire to save more for retirement is reflected across investment knowledge groups, with expert/advance investors 7% more likely to want to save more (70%) than beginner/ rudimentary investors (63%). 

Interestingly, we can see that non-retired people between 18-37 are slightly more likely to want to save more for their retirement (70%) than people over 38 (64%) following the events of 2020. This is despite only 52% claiming they want to save more towards their savings generally.

This is because more non-retired people over 38 want to save the same amount towards their retirement.

And people are committed to doing this. 85% of non-retired people who said they want to save more, are already saving more money towards their retirement both globally and across different regions.

Likewise, the non-retired people who said they wanted to start saving less for their retirement are doing so with 79% of these people are already reducing the amount they’re saving.

Sentiment towards retirement age is quite evenly balanced. About a third of non-retired people think they will now retire later, while a third think they’ll retire at the same age, and a little under a third think they will retire earlier.

To look into why these three groups have emerged and what from the past year could have led to it, we can compare it with people’s savings performance during the course of 2020.

Non-retired people’s attitudes towards expected retirement age following COVID-19

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How well non-retired people saved according to plan vs. when they think they’ll retire

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There are a few interesting results that are worth pulling out. Starting with the group of non-retired people who think they will retire earlier. 39% of them saved as much as they planned to, perhaps demonstrating that they feel confident in their financial future, especially given the challenges the past year has presented. 30% of this group saved more than they planned to, again demonstrating confidence in their plans.

However, another theme is that of the non-retired people who have not saved as much as they’d planned but still think they’ll retire earlier (21%) or that they’ll retire at the same age (43%). While this could be cause for concern, the results show that at least this group are aware they will need to save a slightly higher portion of their income, compared to the global average of 12.8%, towards retirement in order to live comfortably.

How saving ability during the pandemic has impacted the amount of savings they think they will need for a comfortable retirement

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When examining the level of income that non-retired people think they need to save each year in order to live comfortably in retirement, there’s a slight difference across regions. Non-retired people in Europe think they need to save the least per year (11.2%) while people in the Americas and in Asia think they need to save 13.9% respectively. People across the UAE, South Africa and Australia think they need to save 13.2%.

Annual percentage of income non-retired people think they need to save between now and retirement to live comfortably, by region

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Annual percentage of income non-retired people think they need to save between now and retirement to live comfortably, by investment knowledge group*

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Interestingly, the level of investment knowledge seems to make very little difference in the amount of income people feel they should save for a comfortable retirement.

There is more variance if we look at people’s age. Those between 18 and 37 are more likely to think they need to save less (12.4%) per year than non-retired people over 38 (13%).

How much people think they should save from their income for retirement vs. how much people are actually saving from their income for retirement

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It would seem that these goals are already achievable as non-retired people are saving more than what they think they should be saving for retirement. Which, in turn, could suggest that the goals are not set high enough.

We find similar results when we consider investment knowledge. Though slightly off target, the beginner/rudimentary and intermediate investors are saving very close to their goal amount. Expert/advanced non-retired investors are saving 2.9% more than what they think is needed for a comfortable retirement.

Looking across regions, we can also see that people’s actions to achieve a comfortable retirement are exceeding their requirements, with the average annual percentage of income that people are actually saving for retirement surpassing their minimum requirements.

People in Europe are saving the least for their retirement (12,4%), while people in Asia are saving the most (15.9%), followed by the Americas (15%) and Other; South Africa, Australia and the UAE (14.8%).

Age also has a small impact on the amount of income people are saving towards retirement. People between the ages of 18 and 37 are saving 14.6% of their income for retirement per year, compared with the 13.8% that non-retired people more than 38 are saving.

Annual percentage of income non-retired people are saving for retirement, by investment knowledge group*

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Annual percentage of income non-retired people are saving for retirement, by region

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Disclaimer

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