Canada Report

The Future of RetirementA new reality

At HSBC, our purpose is to help our customers fulfil their hopes and dreams and realise their ambitions for themselves and their families, by enabling them not only to manage their financial affairs today, but also to plan for their long-term financial futures.

I am therefore delighted to introduce the latest in HSBC’s series of

independent global studies into The Future of Retirement. A new reality

is our eighth report and highlights the real challenges in planning for and

achieving the retirement you want.

This report reveals that saving for retirement is a challenge that most people

face around the world. Most people hope and aspire to a positive retirement

filled with family and leisure pursuits. However, the majority of non-retired

people admit that financially they are not preparing adequately, or at all,

for a comfortable retirement.

There are, of course, many obstacles to saving, including the lack of a regular

savings habit and the financial impact of unexpected life events. However

this is creating a ticking time-bomb, where the hidden impact of their lack

of saving will only become clear to them years later, when they retire without

the income to enjoy their retirement. Too often an optimistic ‘hope

for the best’ mentality is standing in the way of sensible financial planning.

The report also highlights the reality that people who have a financial plan

in place, particularly if they also take professional financial advice, on average

will have more money in retirement than those who don’t have a plan.

The reason is simple - they save more and they save for longer - with people

saving on a regular basis having nearly double the mean value of retirement

savings compared with those just saving from time to time.

With life expectancy still on the increase, the need to save and plan for your

retirement is becoming ever more critical.

Retirement is one of the five customer needs all of our Relationship

Managers discuss with our customers, and we hope the insights from

this report will encourage everyone to think more about the need to plan

and save for their retirement, and to start as early as possible.

Simon Williams

Group Head of Wealth Management, HSBC

ForewordContentsForeword by HSBC

Introduction

Key findings

Part One: Getting the retirement you want

y Retirement hopes and fears

y How much money will be needed in retirement and where will it come from?

Part Two: The obstacles to saving

y Why are people not saving for retirement?

y Short-termism in savings behaviour

Part Three: The role of saving and planning

y When do retirement saving and planning begin

y The drivers of retirement saving and planning

y How people make financial plans for retirement

y The planning premium

Practical actions towards a more

comfortable future

3

4

5

6

9

12

17

3

Key findingsThe latest global report, A new

reality, is the eighth in the series

and is based on a survey of more

than 15,000 people in 15 countries in

July & August 2012. A further report

looking at how people are living in

retirement will be published later

in the year.

This country report, based on the

views of over 1,000 respondents in

Canada, highlights our main findings

into what people are looking forward

to from their retirement and how

they are expecting to pay for these

aspirations. The first part highlights

people’s hopes and fears for

retirement. The second part explores

savings behaviours and what factors

encourage and discourage saving.

The third part focuses on how people

are currently saving and planning

for retirement, and whether they

are doing enough. The final part lists

some practical actions that people

can take to improve their financial

well-being in later life.

The global report, other country

reports and all previous reports

are available on www.hsbc.com/

retirement.

IntroductionHSBC’s The Future of Retirement programme is a world-leading independent study into global retirement trends. It provides authoritative insights into the key issues associated with ageing populations and increasing life expectancy around the world.

y More than half (55%) of Canadian

respondents think their retirement

preparations are inadequate: 23%

are not preparing at all, while 32%

say they are not doing enough.

y People run the risk of living long

beyond their retirement savings:

on average Canadian respondents

expect their retirement to last

for nineteen years, but their

retirement savings to last for only

eleven years.

y The average Canadian respondent

believes that 34% of their

retirement income will come

from the state, and for 47% the

state pension will be an important

source of retirement income.

Given that Canadians want a

retirement income that replaces

four-fifths (81%) of a comfortable

working life income, there is an

overreliance on state benefits.

y Respondents understand the

importance of preparing for

retirement from early on in life: on

average, they see the age of 35

as the latest by which people can

start planning financially and still

expect to maintain their standard

of living in retirement.

y When asked to choose between

saving for the short-term goal of a

holiday and the longer term goal of

retirement, Canadian respondents

ranked these priorities almost

equally: if they could only afford

to save for only one of these

options for a whole year, 41%

chose a holiday, whilst 44% chose

retirement

y Employer-led initiatives are an

important incentive to retirement

saving: 27% of Canadian

respondents started planning

financially for retirement after their

employer paid into a pension for

them, although a more important

motivator is the desire to achieve

a good standard of living in

retirement (45%).

y In Canada, there is a strong

relationship between formal

financial planning and saving more,

when we look at the retirement

savings levels of respondents.

Amongst both men and women

those using formal planning have

greater levels of retirement savings

than those who plan informally.

Moreover, those who use

professional advice typically have

two to three times the retirement

savings of those who have not

used such advice.

Family and travel are the most important aspirations for retirement

4 5

To understand retirement savings

needs in Canada, there is a need to

understand people’s aspirations for

later life. The most popular retirement

aspiration is the desire to spend more

time with friends and family (56%).

Almost equally desirable is the ability to

take frequent holidays (47%) and travel

extensively (42%).

Respondents were also questioned

about their fears around retirement.

The most common concerns are

financial hardship (55%) and poor

health (50%). Taken together, these

findings suggest many are rightly

worried about the growing problem

of paying for healthcare and long term

care in retirement. According

to the UN, by 2050 it is estimated that

there will be 42 Canadians aged 65

or over for every 100 15-64 year olds,

compared with a global average of 26.

Part One

Getting the retirement you want

Respondents were asked how much

money they feel they will need to

live comfortably, both now and in

retirement. Using these figures, the

findings show that the proportion

of ‘working age’ income that

respondents believe they need for

a comfortable retirement is 81%.

This indicates how much savings

behaviour will have to change in order

for people to achieve their aspirations

in later life, especially as 32% of

respondents are not adequately

preparing for retirement, and one-

quarter (23%) are not preparing at all.

To further reveal the inadequacy of

current savings levels, respondents

were asked not only how long

they expected to live in retirement,

but also how long they expected

their savings to last. The findings

reveal that on average Canadian

respondents expect their retirement

to last for nineteen years, but their

retirement savings to last for just

eleven years.

Retirement hopes and fears

How much money will be needed in retirement and where will it come from?

Figure 1: Spending time with family and friends & travelling are key retirement aspirations

Q: Many people have specific hopes and aspirations for their retirement. Which, if any, of the following are

important aspirations for you? (Base: All not fully retired)

56%

47%

42%

32%

32%

30%

29%

28%

16%

14%

13%

13%

13%

13%

5%

4%

Spending more time with friends and family

Frequent holidays

Extensive travel

Learning a new skill/hobby

Continuing to work to some extent

Taking more exercise/playing more sport

Home improvements/gardening

Charity/voluntary work

Buying a new car/other expensive item

Living abroad

Learning a foreign language

Further education

Writing a book

Starting a business

None of these

Don’t know

Figure 2: Financial hardship and poor health are the biggest retirement fears

Q: Many people also have concerns or fears for their retirement. Which, if any, of the following

concerns or fears do you have? (Base: All not fully retired)

55%

50%

35%

34%

28%

28%

24%

22%

18%

13%

7%

4%

4%

Financial hardship

Poor health

Having to work for longer than I want to

Not having enough money for good healthcare provision

Not being able to realise my hopes and aspirations

Loss of memory

Boredom

Loneliness

Not being able to work

The move from ‘active’ to ‘passive’ retirement

Discrimination

None of these

Don’t know

32%

27%

23%

7%

11%

Figure 3: Almost a quarter are

not preparing at all for retirement

Q: Overall, financially do you think

that you are preparing adequately

for a comfortable retirement?

(Base: All not fully retired)

81% :People need four-fifths of current income to stay comfortable in retirement

Financial hardship and poor health are the biggest retirement fears

No, I am not preparing at all

No, I am not preparing adequately

Yes, I am preparing about adequately

Yes, I am preparing more than adequately

Don’t know

76

34%

13%

10% 13% 12%8%

5%5% 5% 6%

3% 4%

16%

14%

12% 10%

25%33%

41%49%

19%

10%13% 8%

8%10%

19%

18%

19%17%

0

20

40

60

80

100

42%

25%

10%

9%

5%4%

38%

24%

10%

11%

5%

4%

38%

29%

9%

8%

4%

6%

51%

23%

9%

6%

4%3%

42%

23%

8%

5%4%3%

Figure 4: A large

proportion of retirement

income is expected to

come from the state

Q: Once you are fully

retired, what proportion

of your retirement

income do you expect

will be funded from

each of the following

sources? (Base: All not

fully retired)

State pension(s)/benefits

Company pension(s)

Personal pension(s)

Investments, e.g. bonds, endowments, shares, unit trusts, mutual funds

Cash savings/deposits

Property income and assets, e.g. renting out, equity release, ‘downsizing’, sale

Inheritance

Selling a business

All 25-34 35-44 45-54 55-64

60%

15%

10%

10%

10%

10%

8%

6%

5%

4%

4%

4%

4%

3%

10%

5%

Figure 6: Non-savers are put off retirement saving due to the cost of day-to-day living

Q: Why have you never saved specifically for retirement? (Base: All never saved for retirement)

Part Two

The obstacles to savingWhy are people not saving for retirement?

47%

38%

28%

27%

22%

21%

19%

13%

15%

13%

11%

10%

9%

8%

6%

5%

4%

4%

3%

3%

2%

1%

2%

14%

Respondents say that they will need

a household income of CAN$48,300

a year to feel comfortable in

retirement. As Figure 4 shows, even

when taking other sources into

account, respondents still expect

to be heavily reliant on the state to

provide their retirement income.

Figure 5 reinforces this point,

showing that nearly half (47%) see

the state as contributing towards

retirement income.

Only 40% of Canadian respondents

are regular savers. Of those who

have never saved for retirement,

three-fifths (60%) are being held

back by the cost of day-to-day living,

rising to 65% of 35-54 year olds.

Nevertheless, respondents seem

to understand the importance of

preparing for retirement from early on

in life and on average see the age of

35 as the latest by which people can

start planning financially and expect

to maintain their standard of living in

retirement.

Figure 5: The state will be an important source of retirement income for nearly half of respondents

Q: Thinking again about the way you envisage funding your own retirement, which of the following means do you think will

contribute towards your living in retirement? (Base: All not fully retired)

State pension/social security

Cash savings/deposit accounts

Personal pension scheme

Defined benefit pension scheme

Mutual funds/unit trusts and investments

Defined contribution scheme

Spouse/partner’s income

Income from property ‘downsizing’/sale/rental

Life insurance

Inheritance

Stocks and shares

Annuities

Other employer pension scheme

Other savings/investment products

Employer savings/share scheme

Long-term care insurance

Investment-linked insurances

Financial support from my children

Other financial windfall

Selling a business

Offshore trusts/deposits

Foreign currency

Other

Don’t know

All my money goes into living day-to-day

I’ve never really thought about it

The economic climate has been too unstable

My employer doesn’t/didn’t offer a pension scheme

Retirement is too FAR away from me to start saving

My employer’s pensions(s) are/were sufficient for my retirement

I’m saving/investing in a different way

I have never worked full-time

I have other pension arrangements in place

I don’t trust financial services companies

I don’t understand savings and investments

Retirement is too CLOSE for me to start saving

My partner’s pension/savings will provide sufficient income

The State will provide sufficient income

Other reason

Don’t know

19 vs.11people expect to spend 19 years in retirement, but their savings to run out after 11 years

42%have never saved specifically for retirement

98

Figure 7 shows that there are some

life events that can derail people’s

efforts to save for retirement.

The most important of these are

becoming unemployed, getting into

debt, and buying a home/ paying a

mortgage (27% each).

Life events can have a damaging

impact on retirement preparation:

67% of those affected by at least

one of the events in Figure 7 said

they saved less for retirement as a

result. In Canada, the most impactful

life event affects people’s retirement

savings behaviour on average for five

years, in line with the global average.

Importantly, nearly three-quarters

(70%) of those whose ability to save

for retirement was ever impacted by

a life event say they are still being

affected by the consequences.

Another obstacle to retirement saving

is the tendency to focus on the

short-term: immediate savings needs

are more tangible and therefore may

be given a higher priority than far-off

goals like retirement. Respondents

were asked to choose whether they

would save towards a holiday or

retirement, if they could only afford

to save for one in a single year:

41% of Canadians chose the former

compared with 44% who opted for

saving for retirement (see Figure 8).

This suggests that for many, short-

term financial needs take precedent

over longer term financial priorities.

On the other hand, most Canadian

respondents are reluctant to dig

into their retirement savings as a

means of dealing financially with

an unforeseen crisis. As Figure 9

shows, only 25% would look to their

retirement savings to get through

serious financial hardship, preferring

to turn to their other savings (33%).

Just under one-in-four (23%) say

they would look for better paid work.

Taken together, this means that

whilst putting shorter term savings

goals first may reduce contributions

to retirement savings, the reluctance

to draw on long-term savings in

an unexpected crisis will help to

preserve the value of retirement

savings for respondents in Canada.

Figure 7: Becoming unemployed, buying a home and starting a family impact people’s ability to save for retirement

Q: Some people experience ‘life events’ which impact significantly on their ability to continue saving for their retirement.

Which, if any, of the following ‘life events’ have EVER impacted significantly on your own ability to save for retirement, and

which one has impacted you the most?(Base: All not fully retired)

Figure 8: Respondents in Canada see saving for a holiday as almost equally

important to saving for retirement

Q: If for one year you could only afford to save EITHER to go on holiday

OR towards your retirement, which would you be more likely to do?

(Base: All not fully retired)

Figure 9: Only one-in-four would use their retirement savings to deal with a crisis

Q: Sometimes people experience unforeseen life events, which can lead to

serious financial hardship. If you were to experience such hardship which,

if any, of the following actions would you be most likely to consider?

(Base: All not fully retired)

Becoming unemployed

Getting into debt/severe financial difficulty

Buying a home/paying a mortgage

The recession/current economic downturn

Significant drop in earnings/pay cut

Illness or accident preventing me/my spouse working

Starting a family

Paying for children’s education

Paying for my own education

Separation/divorce

Finishing full-time education

Having to fund/pay for a dependent

Getting married/civil partnership

Starting work

Having to stop work to look after someone

Remarrying

Other event

None of these events have significantly impacted

Don’t know

Use my other savings & investments

Use my retirement savings & investments

Look for better-paid work

Move into a smaller home

Borrow (more) money

Sell my valuables

Sell my main home

Ask friends and family for help

Use my insurance(s)

Sell my second home/other property

Sell my business/business assets

Other action

Don’t know

27%

27%

27%

21%

20%

18%

17%

16%

13%

12%

9%

8%

6%

6%

2%

8%

7%

12%

9%

33%

23%

25%

20%

18%

16%

17%

9%

14%

6%

2%

16%

6%

Short-termism in savings behaviour

27%say becoming unemployed has affected their ability to save for retirement

Save to go on holiday Save towards retirement

All

France

UK

USA

Canada

Brazil

Mexico

UAE

Egypt

Hong Kong

India

Malaysia

China

Taiwan

Singapore

Australia

1110

The findings show that saving

(putting money aside for the future)

and financial planning (evaluating

the current situation, identifying

future goals and taking action to

achieve them) start at varying and

different ages in the countries we

surveyed. On average worldwide,

retirement saving starts four years

before planning for retirement starts,

while in Canada the median gap is

three years. These average figures

hide the fact that 42% of Canadian

respondents have never saved for

retirement, including 47% of 55-64

year olds.

Figure 11 shows there are many

different reasons why people begin

to save for retirement, though fear

of financial hardship in retirement is

by far the most common motivator,

chosen by nearly half (43%) of

all respondents. More positive

developments such as starting work

(14%), a promotion (9%)

or getting out of debt (13%) are far

less important triggers.

Employer contributions have

traditionally been an important part of

retirement planning in Canada, and

Figure 12 shows that this remains

the case. These findings show that

paying into an employee’s pension

can have positive effects beyond

the obvious contribution towards

retirement income: for 27%, it was

an incentive to begin planning for

retirement. Elsewhere, the realisation

that the state pension is not adequate

is another driver of planning behaviour,

with 26% saying it was the reason

they began retirement planning

Nevertheless, the most common

motivation to plan for retirement is

simply the desire for a good standard

of living in retirement (45%).

Part Three

The role of saving and planningWhen do retirement saving and planning begin?

The drivers of retirement saving and planning

Figure 10: There is a smaller gap between saving and planning for retirement

in Canada

Q: At what age did you first start to save specifically for retirement? At what age

did you first start planning financially for retirement? (Base: All not fully retired,

chart shows medians and excludes those who have not started saving or planning)

Figure 11: Fear of financial shortfalls

in retirement is motivating saving

Q. There are many reasons why

people start saving for retirement.

Which of the following are the main

reasons why you started or would

start saving for retirement?

(Base: All respondents)

Fear of not having enough in to live on in later life

Tax efficiencies

Running out of time to plan for retirement

Qualifying for a company pension scheme

It’s what people do

Advice from friends and family

Advice from a professional financial adviser

Starting work

Paying off other debts

News stories about low incomes in retirement

Seeing my retired parents’ standard of living/quality of life is lower than I want

Buying a home

Starting a family

Paying the mortgage off

Getting a promotion or pay increase

Government advice about the need to save for retirement

A period of illness or injury

Government cutting the State pension

Finishing full-time education

Getting married/civil partnership

The economy recovering

Children leaving home

Remarrying

Other reason

Don’t know

43%

18%

16%

16%

16%

14%

14%

14%

13%

12%

12%

10%

9%

9%

9%

8%

8%

10%

8%

7%

5%

5%

5%

1%

9%

55%are not preparing adequately for a comfortable retirement

Age (years) started saving for retirement Age (years) started planning for retirement

13

26

25

30

26

27

24

25

28

30

28

29

28

29

26

25

26

30

25

30

28

30

30

26

30

30

29

30

30

30

28

27

30

All

UK

France

USA

Canada

Mexico

Brazil

Egypt

UAE

India

China

Hong Kong

Taiwan

Singapore

Malaysia

Australia

All

UK

France

USA

Canada

Mexico

Brazil

Egypt

UAE

India

China

Hong Kong

Taiwan

Singapore

Malaysia

Australia

12

As Figure 13 shows, financial

planning for retirement can take

several forms. The most common

methods of retirement financial

planning are informal such as

people’s own thoughts (34%)

and people’s own approximate

calculations (24%), whilst 23% have

not undertaken any form of financial

planning at all.

The research looks at the relationship

between financial planning and saving

money. Globally, there is a positive

relationship overall – the ‘planning

premium’ – with 44% of respondents

saving more for retirement as a result

of having a financial plan, compared

with only 31% who did not save more.

This relationship is almost as strong

in Canada, where more respondents

(41%) say financial planning led to

increased saving for retirement, whilst

31% say they did not save more.

However on closer examination, the

findings reveal some further insights

behind this headline. Of those who

used a professional financial adviser

for planning, 57% saved more for

retirement as a result. And of those

who consulted a professional financial

adviser to develop a written financial

plan, 64% saved more for retirement.

Self-directed planning appears less

helpful: only 38% of those who

relied on their own thoughts and

actions saved more for retirement.

In Canada, the planning premium is

slightly weaker amongst those nearing

retirement: amongst 55-64 year olds,

just 36% say financial planning has led

to them saving more for retirement.

This direct relationship between

financial planning and greater savings

is not just a correlation, it is a cause

and effect: many respondents say that

having a financial plan led them to

save more for retirement. In Canada,

generally those using formal planning

have greater levels of retirement

savings than those who plan informally.

Moreover, those who use professional

advice typically have twice (men) or

three times (women) the retirement

savings of those who have not used

such advice. However, the planning

premium appears weaker amongst

those on average incomes.

Figure 12: Employer pension contributions provide a spur to retirement planning

Q: What are the main reasons why you started planning financially for your retirement?

(Base: All respondents excluding those who have not planned financially for retirement)

Figure 13: Retirement planning is largely self-directed

Q: Planning financially for retirement can take several forms, both formal and informal.

In which of the following ways, if any, have you ever planned for your retirement?

(Base: All respondents, chart does not show those who have not planned for retirement)

Figure 14: Over two-fifths believe financial planning has boosted their savings and

those that do so have saved more

Q: As a result of having a financial plan in place, would you say you have saved

more for your retirement and for other purposes?

(Base: All respondents excluding those who have not planned financially

for retirement)

Retirement saving Other saving

I want/wanted a good standard of living in retirement

It’s the right/responsible thing to do

My employer pays/paid into pension for me

The State will not provide an adequate retirement

I want/wanted to realise my hopes and aspirations in retirement

I can/could afford to

I want/wanted to retire early

Advice from a professional financial adviser

I want/wanted to have more in retirement than my parents

Specific live event, e.g. getting married, starting a family

My spouse/partner suggested I start planning

I received a pay rise

Other reason

Don’t know/can’t recall

My own thoughts

My own approximate calculations

Conversations/meetings with a professional financial adviser

My own ‘to do’ list

Written plan routinely reviewed with a professional financial adviser

Advice/plan drawn up by HR/Benefits/Pension team at work

Online self-directed planning solutions/tools

‘One-off’ written plan from a professional financial adviser

Other

Don’t know/can’t recall

45%

38%

27%

26%

24%

22%

21%

19%

16%

11%

7%

6%

7%

7%

34%

24%

22%

20%

11%

10%

7%

7%

4%

9%

How people make financial plans for retirement

The planning premium

31%

15%

41%

13%

35%

12%

40%

13%

Yes No Don’t know Not applicable - I don’t have a financial plan in place

41%saved more for retirement as a result of having a financial plan in place

1514

Figure 15: Financial planning and advice have a positive effect on retirement savings levels

Q: Thinking now about the total value of all your retirement savings and investments (including any defined benefit, defined

contribution, personal, or other pensions schemes, including employer contributions), approximately what is the total value of

these savings and investments? (Base: All respondents)

*Income CAN$32,001 – 40,000

Retirement savings & investments values (mean)

Respondents who All respondentsAverage income respondents*

Men Women

Used formal retirement planning CAD 228,082 CAD 103,879 CAD 295,574 CAD 163,488

Used informal retirement planning CAD 206,796 CAD 112,759 CAD 260,059 CAD 141,471

Did not use any retirement planning CAD 32,710 (N/A – low sample size) CAD 51,847 CAD 15,251

Used a professional financial adviser CAD 247,588 CAD 111,434 CAD 311,742 CAD 181,815

Did not use a professional financial adviser CAD 108,661 CAD 112,105 CAD 156,527 CAD 57,533

All respondents CAD 154,760 CAD 111,880 CAD 207,344 CAD 99,352

Practical actions towards a more comfortable futureHere are some practical steps people can take to improve their financial well-being in later life, based on the key global research findings:

Action 1: Get real about your retirement needs

Globally, respondents believe their savings will run

out on average halfway through their retirement.

With life expectancy increasing, people need to be

aware how long their money will have to last, so that

they can take steps to avoid any shortfall.

Action 2: Put your savings priorities in order

Globally, 22% are not currently saving anything for

retirement, whilst 43% would choose saving for a

holiday over saving for retirement if they could only

afford to do one for a year.

A proper balance needs to be established between

spending on short-term needs and saving for longer-

term goals such as retirement. Shifting priorities

now towards longer-term saving can lead to a more

prosperous future.

Action 4: Plan for the future

There is a direct link between having a financial plan

and saving more: globally, 44% say they saved more for

retirement with a financial plan in place, whilst only 31%

say they did not save more.

Having a financial plan and just saving something,

however small to start with, can make a big difference

to retirement income in the long run.

Action 3: Be aware of how major life events affect saving for retirement

Life events, such as starting a family, impact on

retirement saving behaviour for an average of four years.

As most people will be affected by these events

at some point in their lives, it is important to prepare

in advance to minimise the detrimental impact on their

retirement savings.

Action 5: Use professional advice to improve your savings position

Looking at respondents with average incomes, those

who use professional advice when planning their future

have the greatest levels of retirement and other savings.

Developing a financial plan with a professional adviser

can help ensure that all retirement needs are identified,

gaps avoided, and eventualities covered.

1716

© HSBC Insurance Holdings Limited 2013All rights reserved.

Excerpts from this report may be used or quoted, provided they are accompanied by the following attribution: ‘Reproduced with permission from The Future of Retirement, published in 2013 by HSBC Insurance Holdings Limited, London.’

Published by HSBC Insurance Holdings Limited, London

Designed and produced by Global Publishing Services

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