Wisdom, not money, tops inheritance goals: Study

Compared to the rest of the world, Canadians appear to be a pretty carefree bunch — at least when it comes to retirement issues — according to the HSBC Insurance fourth annual global Future of Retirement study.

Undertaken by Oxford University’s Institute of Ageing, the survey asked 21,000 people in 21 countries (1,000 in each country) about retirement. The survey found that not only do Canadians have the rosiest outlook on their retirement prospects, they are also are unconcerned about leaving money for their family and want the government to play a greater role in retirement planning.

There is a sizable difference of opinion between “pre-retired” (age 40 to 60) and “post-retired” (over age 60) respondents when it comes to retirement prospects. But overall, Canada has the highest optimism in the world. Only 36% of the post-retirement group are worried about money in retirement, while 48% of the pre-retirement group are worried about this.

“Canadians show the most surprising degree of optimism in retirement compared to other countries. Canadians are extremely fortunate because of the forced government programs [such as the Canadian Pension Plan],” says Kathy McGarrigle, head of personal finance for HSBC. “Statistics show about 48% of the pre-retired group in Canada are worried about money in retirement — it’s about 70% in the rest of the world.”

Where Canadian respondents do start to converge with global respondents is on the topic of health care and disability. More than two-thirds of pre-retired Canadians (69%) are worried about their health prospects in retirement. That worry decreases slightly among the post-retired group, to 67%. Globally, 71% of pre-retired and 70% of post-retired are worried about illness and disability in retirement.

McGarrigle says, though, she was most surprised by the fact that, globally, leaving behind a monetary inheritance for children is a very low priority. McGarrigle notes that the answers were fairly consistent across earnings demographics, so it likely was not a case of respondents not having enough wealth to leave behind.

“The most interesting, and perhaps the most surprising, finding is that globally and in Canada, 77% of people want to leave something quite different to their heirs than wealth,” she says. “So there are going to be quite a few disappointed children out there.”

In Canada, the findings show that more than three-quarters (77%) of the working population and 73% of retirees want their heirs to principally inherit their perspective on life. This may include their attitudes on spirituality, their sense of humour, knowledge or support for the community. Only 23% of pre-retirees and 27% of post-retirees favour leaving behind tangible or material bequests, such as property, money or a business. When it came to just plain cash, only 8% of Canadian respondents were intending to leave that behind.

It seems many Canadians also want the government to play a larger role in their retirement. When asked how Canada should provide for the aging population, 38% of pre-retirement and 27% of post-retirement respondents wanted the government to enforce additional private savings. Twenty-eight per cent of the Canadian working population and 35% of retirees would increase the retirement age while 16% of pre-retired and 12% of post-retired Canadians support increasing taxes.

Canadian confidence that the government can play an important role in retirement is very low, with only 24% of the pre-retirement group and 21% of the post-retirement group confident in there being adequate state provision in retirement.

McGarrigle highlights that the disposition of the pre-retirement-age respondents to support things like forced private savings is an opportunity for advisors and means these clients may be more amenable to more structured and disciplined financial plans.

“There is a growing support from pre-retired Canadians in particular for additional forced savings. They are more receptive to forced savings, whether it’s through government, their companies or whether it’s their own forced savings regimen,” she says. “Advisors should make sure your clients have a financial plan, and consider things like working on a plan that uses regular monthly contributions.”

Filed by Mark Noble, Advisor.ca, mark.noble@advisor.rogers.com

(05/13/08)

Mark Noble