Barclayswealth Report 0910

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    Barclays Wealth InsightsVolume 12: The Age Illusion

    In co-operation With Ledbury Research

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    B

    About Barclays WealthBarclays Wealth is a leading global wealth manager, and the UKs largest, with total client assets of 153.5bn,

    www.barclayswealth.com

    and www.barclayswealth.com/insights

    Follow us on www.twitter.com/barclayswealth and www.twitter.com/wealthinsights

    About this report

    Researched by Ledbury Research and written in conjunction with Barclays Wealth, this 12thBarclays

    Wealth Insights

    high net worth community.

    Respondents were drawn from 20 countries around the world, across Europe, North America, South America,

    For information or permission to reprint, please contact Barclays Wealth at:

    or email [email protected]

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    1

    ForewordAcross the world there are many preconceptions held about older people. It is widely thought that age acts as

    Insights report; The Age Illusion:

    of this group.

    I hope that you enjoy this latest chapter.

    Thomas L. Kalaris

    Barclays Wealth

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    2

    Our Insights PanelMatthew Brady

    Gordon Gibb, Entrepreneur

    Dr Sarah Harper

    John Llewellyn, Llewellyn Consulting

    Helen Pitcher, Chair of IDDAS

    Dick Pyle

    Phil Smith

    Dr. K K Tse, Founding Chairman, Hong Kong Social Entrepreneurship Forum

    Steve Vernon, US Author, Columnist and Actuary

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    3

    The Age Illusion:How the WealthyTheir Retirement

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    Introduction

    recent phenomenon. When retirement schemes were

    th century, retirees

    retirees are often enjoying 20 to 30 years of leisure

    in its current form has become unsustainable, both for

    is therefore unrealistic.

    to do so. Todays older generation can often be found

    using their retirement years to start a new career, set up a

    choosing not to do so.

    wealthy people to doubt whether planning for a sustained

    or sensible option. Worries about the unpredictability of

    This report, the 12thBarclays Wealth

    Insights

    considers what retirement means to todays wealthy.

    It draws on insights from wealthy entrepreneurs and

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    5

    Many wealthy individuals will neverstop working.

    engaged in what we would traditionally regard as their

    Unpredictability is a fact of life.

    money needed to maintain their lifestyle in retirement

    other factors, such as their personal health or rates

    Planning for your later years is challenging but

    essential.

    stages of life in different ways. But whether they plan

    than a radical change in the way in which we plan for

    and fund later life.

    Attitudes will continue to change.

    creating jobs and growing their wealth: as such, they

    up with reality. The corporate sector will gain from their

    and growing their wealth.

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    The research has highlighted an interesting and,

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    a pleasant lifestyle, and some hard physical labour.

    For Mr. Pyle, the most important thing about retirement

    Chart 1 No matter what my age, I envision being involved in commercial/professional work of some kind.*

    All

    By wealth level

    By source of wealth

    By age

    1m-2m

    2m-10m

    10m+

    Inheritance

    Entrepreneur

    Earnings

    Property

    Investment gains

    60%

    57%

    63%

    60%

    57%

    68%

    58%

    68%

    64%

    Under 45 70%

    45-54 65%

    55-65 52%

    Aged 65+ 50%

    * % of respondents completely agreeing or slightly agreeing with this proposition.

    Source: Ledbury Research

    15 years of pension-funded retirement.

    What is particularly interesting is that this phenomenon

    through entrepreneurship. In fact, the source of wealth

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    * % completely agreeing or slightly agreeing with the proposition that No matter what my age, I envision being involved in commercial/professional work of some kind.

    Source: Ledbury Research

    Saudi Arabia 92%

    UAE 91%

    Qatar 89%

    South Africa 88%

    Latin America 78%

    Hong Kong/Singapore 56%

    US 54%

    Japan 46%

    Spain 44%

    Switzerland 34%

    Programme, she has recently completed a study on

    so much to offer, but maybe want a second career.

    Maybe you want to do something different, or maybe

    As Sarah Harper, Professor of Gerontology and Director

    differences across the world. Of particular note is that

    in some cases fewer than 10 percent. Amongst the

    Spain and Japan.

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    Chart 3 If you have already stopped working, how important were the following factors in the decision?*

    * % citing the factor as very important.

    Source: Ledbury Research

    By wealth level All 1-2m 2-10m >10m

    Made enough money to do so

    Desire to do something different

    Ill health

    State of the economy

    Simply reaching the normal age to retire

    Pressure from family and friends

    regarded as an automatic reason to retire. Indeed, as the

    not going to retire as our parents or grandparents did,

    decision to retire. This lagged behind most other factors,

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    Chart 4 Aspirations for when youve stopped working vs. the reality*

    again in the commercial world.

    Source: Ledbury Research

    Under 45 45-54 55-65 65+ Over 65

    Spending time with family

    Socialising

    Hobbies

    Sports

    Politics

    It is both scary and

    your life around and doing

    in the future. The results, as the table below shows,

    their hobbies and socialising.

    do manage to translate this aspiration into reality:

    to follow dreams and to do something completely

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    little to do with money, but is rather due to their job

    Most of the people we

    of time and structure to the day. The prospect of an

    empty day after retirement can unsettle. But rather

    they want to do. Some of these wishes, ignored before,

    second thoughts a year or two down the road.

    chain. As Helen Pitcher puts it, The biggest change is to

    people why certain things should happen. Old habits

    can die hard, and she recommends to always try to

    of self-analysis and she notes that many of the most

    boards are being encouraged to be more transparent

    about succession issues, this process can also be seen

    on in life. Retiring in your 50s will be seen as outdated,

    and there will be more people routinely on boards in their

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    Life is unpredictable for all age groups. But, for those

    their retirement can be compounded by concerns about

    personal health. The result, as shown in Chart 5, is that

    belief in the predictability of most factors surrounding

    the amount of money needed to maintain their lifestyle

    of money needed may be misplaced, if only because it

    is impossible to predict the age at which you will die.

    their health as predictable, and the differences can be

    points out, is poor health and particularly the need for

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    Chart 5 What factors are predictable?*

    * % of respondents under 65 believing that these factors are quite predictable or very predictable in later life (aged 65+).

    Source: Ledbury Research

    Total

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    Chart 6 When planning for your retirement, how predictable is the rate of return on your investments?*

    Chart 7 When planning for retirement, how predictable is the rate of tax that you will have to pay?*

    America are, perhaps surprisingly, optimistic; but it

    here. Respondents in the UK, US and Ireland are much

    more sceptical.

    * % of respondents aged up to 65 believing that this is quite predictable or very predictable.

    Source: Ledbury Research

    * % of population aged up to 65 believing that this is quite predictable or very predictable.

    Source: Ledbury Research

    By region

    Europe 35%

    North America 41%

    Latin America 73%

    51%

    Rest of World 61%

    By age

    57%

    45%

    39%

    n/a

    Saudi Arabia 76%

    Latin America 73%

    India 71%

    Spain 66%

    South Africa 63%

    Switzerland 73%

    Hong Kong 70%

    Monaco 68%

    Singapore 65%

    Latin America 58%

    Monaco 39%

    Qatar 33%

    Ireland 28%

    UK 27%

    Japan 26%

    Qatar 35%

    US 35%

    Saudi Arabia 34%

    UK 34%

    Ireland 30%

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    Succession: the baby elephant in the room

    directly under control, and less unpredictable. But life can

    in regard to faith in their ability to manage wealth.

    it may increase it. Retirement has traditionally been a

    * % of respondents slightly agreeing or completely agreeing with this statement.

    Source: Ledbury Research

    UAE 98%

    Saudi Arabia 95%

    Ireland 83%

    Qatar 82%

    South Africa 80%

    By wealth level

    1m-2m 55%

    2m-10m 56%

    10m+ 67%

    UK 51%

    US 44%

    Japan 41%

    Australia 39%

    Switzerland 38%

    According to Phil Smith, Head of Financial Planning at

    people may be retiring later this certainly does not mean

    that they should put off succession planning. It actually

    means that they should start planning much earlier as

    their wealth may increase and the situation can become

    strong case here for robust succession planning much

    than other wealth groups.

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    Chart 10 I think my children have a proper understanding of money*

    * % of respondents slightly agreeing or completely agreeing with this statement.

    Source: Ledbury Research

    By region

    Europe 68%

    North America 70%

    Latin America 83%

    65%

    Rest of World 63%

    By age

    58%

    66%

    70%

    75%

    Monaco 87%

    Latin America 83%

    Spain 77%

    Hong Kong 75%

    Australia 71%

    UK 63%

    South Africa 61%

    UAE 55%

    Qatar 54%

    Japan 46%

    By wealth level

    1m-2m 65%

    2m-10m 68%

    10m+ 74%

    We attempted to capture such worries about the ability

    respondents whether they thought their children had

    not on the whole more sceptical about their childrens

    children had a proper understanding of money than

    other wealth groups.

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    to their descendants. Japan again is the outlier here.

    sizeable amount of their wealth to their family.

    on their wealth.

    Chart 11 Passing on wealth to the next generation*

    * % of respondents slightly agreeing or completely agreeing with the statement When I die, I wish to leave a sizeable amount of my wealth to my

    children/grandchildren/family.

    Source: Ledbury Research

    Qatar 94%

    UAE 91%

    Monaco 91%

    Saudi Arabia 86%

    South Africa 85%

    Australia 67%

    UK 65%

    Ireland 65%

    US 62%

    Japan 42%

    Entrepreneur Gordon Gibb

    of it. As an entrepreneur, he puts more emphasis

    he issue of succession. As he points out, it can often

    management of wealth within families, both within

    generations and between generations. The problem

    here can be how to reconcile different beliefs within

    the family on how the business should progress;

    the second generation. Once this is done, there

    them a way to do something different.

    sort of culture where it is possible for the rest of

    their management team to tell them when it is

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    as a safety net and to enable wealth transfer to

    Financing thethird stage

    to predict for the population as a whole.

    Whilst it is possible to set down some basic

    are inherently contradictory. Varying priorities and

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    for retirement.

    Phil Smith, Head of Financial Planning at Barclays

    Safe

    Decent returns.

    people do not pay enough attention too. There may

    income and capital.

    Flexible.

    Inheritable.

    problem sometimes with annuities or many

    forms of pension plans.

    1 Barclays Wealth nor its employees renders tax or legal advice and readers should consult with their accountant, tax adviser or lawyer regarding their personal circumstances.2

    1

    2

    crisis has underlined the need for a proper asset

    asset classes.

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    in fact seen an increased interest in long-term estate

    this remains a source of concern.

    of retirement, rather than a radical change in the sorts

    Phil Smith adds: There is a trend to pass on wealth to

    wealth. Trusts are a popular way to do this as they offer

    the opportunity to plan how much wealth is distributed

    whether it be as a lump sum or regular income stream;

    whilst also allowing for the grandparent to specify at what

    3

    3 Barclays Wealth nor its employees renders tax or legal advice and readers should consult with their accountant, tax adviser or lawyer regarding their personal circumstances.

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    better health, and will change further in the years to come.

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    There is, perhaps, a preconception amongst some that

    is a growing understanding that the older generation

    Llewellyn of Llewellyn Consulting, that realisation has

    In his recent paper Conditions for Growth

    argues that increasing the statutory retirement age, and

    encouraging higher participation rates in the labour force

    in the years leading up to retirement, will lead to higher

    rates of GDP growth.

    Mr. Llewellyn points out that the number of older men

    in the UK labour force has in fact fallen sharply in the last

    since then: This is a trend in the right direction but it

    says Mr. Llewellyn.

    Allowing both male and female participation rates in the

    blessedretirement

    physical labour. But it is not the case anymore for many

    in a time of high unemployment, may feel that this is

    creates its own demand. If it werent true, then all the

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    the concept of retirement

    contributing to society in

    some way, shape or form

    Steve Vernon, US Author, Columnist and Actuary

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    if immeasurable, impact on the corporate scene.

    facto age for stepping down from board appointments

    stay the course. These tensions may become particularly

    The hardest demon to

    wrestle with is accepting

    when its the right time for

    associated with wealth transfer within families.

    they will not feel obliged to accumulate so much during

    spending needs, but not necessarily the resources to

    meet them. In other words, they might be seen as a

    This may, perhaps, encourage the use of family trusts

    or similar arrangements amongst more segments of

    the wealthy population. But it may also encourage more

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    Contact us

    email [email protected]

    www.barclayswealth.com

    Conclusion

    for the economy and the corporate sector. As well

    as contributing both directly and indirectly to GDP,

    boards and businesses in the corporate and not-for-

    remaining in circulation.

    decline a traditional retirement is that they do not defer

    place approaching retirement age. Ongoing discussion,

    their business interests, or a need to change further

    consider the timing of and rationale for transfers of

    wealth within their families.

    sight, it should not be out of mind.

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    Legal note

    of this information, neither Ledbury Research nor

    Barclays Wealth can accept any responsibility or liability

    for reliance by any person on this report or any of the

    information, opinions or conclusions set out in the report.

    This document is intended solely for informational

    purposes, and is not intended to be a solicitation

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