Retirees' focus on purchasing luxury goods such as holidays or new cars has plummeted over the past three years, Schroders' Global Investor Study 2020* has found.
This study of more than 23,000 people who invest from 32 locations globally, revealed that just 7% of retirees would prioritise luxury items, compared with 24% in 2017.
Instead, 21% of retirees globally would invest their disposable income back into their retirement savings, significantly up on 5% three years ago. A further 26% of retirees would invest in another type of investment vehicle such as equities, bonds or commodities.
This new focus on bolstering existing pension pots is perhaps reflected by 41% of investors expressing concerns that their retirement income will not be sufficient. This is despite their average return expectations over the next 12 months being 8.8%. Investors in Belgium, Taiwan and Japan were the most worried their retirement incomes will not be sufficient.
Those in Russia, Chile and Canada were the least concerned they had enough saved.
Indeed, 41% of non-retired people expect to be working the same or even an increased number of hours per week in their 'retirement'. Many investors cited that the consistent changing of rules around retirement by their government was hindering their ability to save, with investors in Thailand, Austria and China most disillusioned.
On the positive side, people's retirement savings from their income continues to be stable at 15.2%. This comes as 55% of people globally agree that state provisions alone won't be enough to support them in retirement. Specifically, investors in the Americas are putting away the most at 16.8% compared with those in Europe at 13.8%.
Worryingly, 38% say they don't understand the options available to them with their retirement savings. In fact, those who class themselves as 'expert' or 'advanced' investors were more likely to feel this way (41%) than their 'intermediate' (35%) and 'beginner/rudimentary' (39%) counterparts.
Interestingly, retired people are almost twice as likely as non-retired people to have the perception that sustainable funds will fail to deliver higher returns, indicating that they may be missing an opportunity.
Rupert Rucker, Head of Income Solutions, Schroders, commented:
'Following a year of significant investment and geopolitical uncertainty, it is perhaps unsurprising that retirees are reining in their retirement ambitions and instead opting to channel their disposable income back into their pensions to boost their pots.
'It is a rational and sensible approach to take, particularly bearing in mind that 41% of people are concerned their retirement income will not be sufficient. This is not helped by many investors globally saying that their respective governments' continual changing of the rules around retirement savings leads them to not see the point in saving specifically for retirement. There is no silver bullet to successfully building up a sufficient retirement pot apart from commitment, patience and time in the market.
'So it is reassuring to see that the average savings ratio is a healthy 15.2% globally.'
Carolina Minio-Paluello, Global Head of Product, Solutions & Quant, Schroders, commented:
'Clarity and understanding are key for people to build up sufficient retirement savings, whether that be through their general investment savings or, indeed, a specific retirement plan.
'So it is concerning to see that even the most advanced investors struggle with the retirement options available to them and, perhaps even more worryingly, many retirees are disregarding the role sustainable funds could ultimately play in delivering their retirement plans.
'It is imperative to continually emphasise that sustainability and robust returns in retirement do not have to be mutually exclusive. We as an industry must look to do more to help people on their retirement pathways to better navigate the challenges and decisions they face.'
To find out more about Schroders Global Investor Study 2020 and read the full report, please click here.
*In April 2020, Schroders commissioned an independent online survey of over 23,000 people who invest from 32 locations around the globe. This spanned countries across Europe, Asia, the Americas and more. This research defines people as those who will be investing at least €10,000 (or the equivalent) in the next 12 months and who have made changes to their investments within the last 10 years.