SEB survey: a decrease in income causes difficulty in adapting for half of retirees
OREANDA-NEWS. April 11, 2016. The SEB Retirement Readiness Survey indicates that nearly two-thirds of current Estonian pensioners do not feel financially secure and that just 35% are able to reduce their spending if needed. In the assessment of nearly half the respondents, it is difficult to cope with a decrease in income upon retirement.
“The average pension of the pensioners that completed the survey is almost two times less than their previous income. This change in their financial situation prompts a review of and adjustments to their current living arrangements,” said Indrek Holst, Chairman of the Management Board at SEB Elu- ja Pensionikindlustus.
Among current Estonian pensioners, 66% were aware before retirement that their income would change in their old age. Nearly a quarter of the respondents admitted that they should have saved more before retiring, as doing so had also been feasible financially.
“Instead of the usual 30 to 40 years, the current pensioners have been accumulating their pensions for a little over ten years; as a result, the impact of the second pension pillar on their retirement pension tends to be modest. Based on the average indicators, pension-age people have accumulated more than EUR 8800 in their second pillar accounts. At first, the amount may seem high; however, once distributed over, for example, 15 to 20 years, the monthly disbursement from the second pillar is nearly EUR 50. Of course, these proportions will change in the future. If the Estonian average wage earner, who has been saving pension money since the establishment of the second pillar in 2002 retires in 2037, this person will have saved as much as nearly EUR 60,000,” Holst added.
Reasons for saving additional funds for pension
The two main reasons prompting people to save additional funds for retirement are the poor financial situation of current pensioners and the nearing of retirement age.
“Looking at the financial situation of current pensioners, there is a realisation that additional money should be saved for one’s retirement; however, few take any actual steps towards doing so. The approach of retirement age is the strongest motivator for saving for pension; however, if saving is begun too late, the savings period may end up being too short,” Holst remarked.
* The data cited draws on SEB’s retirement readiness survey, conducted in cooperation with the market research company TNS for the second consecutive year in all three Baltic States. The survey was conducted in October 2015, with a total of 1700 private individuals participating.