High Standard of Living is Europe's Driving Force Behind Retirement Planning
When it comes to retirement planning, investors across Europe are driven by the prospect of achieving a high standard of living when they retire – according to research from Schroders.
At a time when the economic slowdown has prompted wide-ranging discussion on pension provision and retirement age, the new Schroders research reveals a sea change in investor attitudes to retirement - what people could do in retirement is proving to be far more important than the question of when people could retire. When asked what motivated retirement planning, six in ten European investors, not yet at retirement age, said that maintaining or improving their current standard of living was a key consideration. In contrast, the allure of retiring early did not feature in the top five responses given (24%).
Top five motivations behind retirement planning for European investors
|1||Maintain or increase current standard of living||60 %|
|2||Debt free lifestyle||41%|
|3||Go on holidays with my family||34%|
|4||Be able to help my children/grandchildren||32%|
|5||Spend more time with my family||26%|
Source: Schroders European Wealth Index – September 2011
The research findings are taken from the Schroders European Wealth Index, a survey that tracks the investment habits and outlook of more than 1,400 affluent investors across 10 European countries (Germany, Austria, Sweden, Switzerland, Spain, Netherlands, Belgium, Italy, France and the UK.) An affluent investor was defined as a person with invested assets, excluding primary residence, of €100,000 (or the equivalent amount).
Whilst there was broad consensus across Europe on the retirement goals that mattered some specific country-by-country highlights emerged.
- Spanish investors chose to have a debt-free life in retirement (54%), followed by German investors (42%).
- French investors emerged as the most family orientated and most likely to prioritise the importance of being free to spend more time with their family (31%). They also placed importance on being able to afford to go on holidays with their extended family (29%) and to be in a position where they could help their children and grandchildren (33%).
- British (72%) and Austrian (58%) investors were most adamant about ensuring they maintained or increased their current standard of living in retirement. The Swedes and Swiss were drawn to the allure of early retirement, although the proportion of people wanting to do this peaked at only 27%. This was overshadowed by 54% and 43% respectively wanting to secure a decent standard of living in retirement.
Set against the retirement plans of many European investors, the Schroders Wealth Index also indicated that many investors could be sleepwalking towards a retirement wake-up call. When asked what size pension pot they would need to deliver a good standard of living in retirement, affluent European investors predicted that an average of €475,862 would be adequate. In today’s money (and presuming an annuity rate of around 5%1 ), this would give investors a typical income of under €23,793 a year, which is less than half the household income that they currently enjoyed (€51,993).
Peter Beckett, Head of International Marketing at Schroders, commented: “Across Europe, the investor dream of a high standard of living in retirement may lead to disappointment unless more short-term action towards retirement planning is taken now. The predictions that investors put forward on the pension pot they would need to retire on would not give many of them the standard of living they expect. Investors should seek advice from financial advisers to review their plans and ensure their long-term financial strategy tallies with the lifestyle expectations they have for retirement.”
1 Source: Money Facts as at 7 December 2011
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Notes to Editors
Additional tables are available upon request. The research was undertaken by YouGov in September 2011 among a representative sample of affluent investors spanning 10 European countries. Schroders plc Schroders is a global asset management company with billion £182.2bn (€211.6 billion, $283.9 billion) under management as at 30 September, 2011. Our clients are major financial institutions including pension funds, banks and insurance companies, local and public authorities, governments, charities, high net worth individuals and retail investors. With one of the largest networks of offices of any dedicated asset management company, we operate from 32 offices in 25 countries across Europe, the Americas, Asia and the Middle East. Schroders has developed under stable ownership for over 200 years and long-term thinking governs our approach to investing, building client relationships and growing our business. Further information about Schroders can be found at www.schroders.com or on Schroders Talking Point www.schroders.com/talkingpoint. Issued by Schroder Investment Management Ltd, which is authorised and regulated by the Financial Services Authority. For regular updates by e-mail please register online at www.schroders.com for our alerting service.