Canadians focus on ‘covering the basics’ of retirement
WATERLOO – Investor sentiment in Canada continued to slide through the first half of 2012, according to the latest Manulife Financial Investor Sentiment Index. Results from the first half of 2012 show the Index now sitting at +24, down two points from December 2011 (+26) and another five points from June 2011 (+29). Overall, investor enthusiasm has decreased across almost all investment vehicles, including fixed income investments, investment properties, balanced funds and cash. The exception this period was appetite for investing in the stock market, where sentiment is up by six points.
Measured against the December 2011 results, Canadians are less likely to agree that it’s a good time to invest in savings vehicles. Attitudes to investing in mutual funds remain relatively steady this period with a drop of only one point. In addition, TFSA remains high, but dropped four points and RESP, RRSP and segregated funds all dropped significantly – eight, seven and eight points respectively.
“Recent economic challenges, including the persistent financial instability in Europe, help us understand why Canadians remain cautious about investing,” said Paul Rooney, President and CEO of Manulife Canada. “As these global economic challenges dominate headlines without any significant signs of recovery, confidence in financial markets will continue to be uncertain.”
This was the first time the Manulife Financial Investor Sentiment Index increased its sample size to 2,000 investors to allow for regional-specific data and to help demonstrate similarities and disparities across the country. The Index tracks Canadians’ opinions of various savings and investment vehicles and whether they believe it is a “good” or “very good” time to invest minus those who feel the opposite.
Canadians’ Outlook on Retirement
During this period, the Manulife Financial Investor Sentiment Index also took a look at Canadians’ retirement goals. The survey results indicate that Canadians are increasingly considering retirement as a time where the focus is on surviving financially, rather than enjoying the freedom and lifestyle retirement brings.
Most Canadians surveyed indicate that covering the basic cost of living is their most important goal for retirement with 88% noting it as important/very important. The traditional “freedom” goals, including travel, building an estate for heirs and donating to charity, are all deemed important by fewer than 50% of respondents.
How Family Income Influences Outlook on Retirement
Notably, as family income rises, the importance of ‘covering the basic cost of living’ and ‘covering the lifestyle I’m accustomed to’ as a retirement goal increases for Canadians. ‘Covering the lifestyle I’m accustomed to’ peaks as family income rises over $100K, with 84% classifying it as important/very important compared to the national average of 72%.
While families with higher income are most concerned with maintaining the lifestyle they’re accustomed to, families with lower income are more concerned about leaving behind an estate. ‘Accumulating an estate to leave behind for heirs’ peaks at 52% for those with family income between $15-25K, compared to 36% nationally.
“These results indicate that despite changing expectations about retirement goals and lifestyles across all those surveyed, families with lower income maintain a strong desire to leave their families with the resources to create better opportunities than they had for themselves,” noted Mr. Rooney. “Thinking about future generations is a constant when it comes to retirement planning.”
Giving to Charity
Nationally, 31% of Canadians rate ‘donating money to charity’ as a priority – making this the lowest ranked retirement goal on the list. Of those that rate this as an important goal, most are between the ages of 18 – 29 years (43%) and 75 years and older (45%).
Young Canadians on Retirement
With the retirement of the baby boom generation, the economic landscape in Canada will shift, and the greatest impact of that change will be felt by young Canadians (ages 18-29 years). This period’s results indicate that younger Canadians are considering that potential impact, showing a greater concern for long-term healthcare costs and providing for family than their parents’ generation. Retirement goals for young Canadians differ from older Canadians in two areas. Younger Canadians are more likely to identify covering healthcare needs (87%) and providing for family in case of illness/death (88%) as important priorities. Both of these categories decrease in importance with age. For example, ‘providing for family in case of illness/death’ ranked third overall with 80% of those surveyed stating it was important/very important. This number decreases to only 66% with Canadian’s who are 75 and over.
Another significant difference between generations is related to investment vehicles. Nineteen percent of young Canadians select CPP/QPP as their primary source of retirement funds, compared to the national average of 13%. This is probably because young Canadians are less likely to have other savings vehicles in place early in adulthood.
About the Manulife Financial Investor Sentiment Index
For 13 years Manulife Financial’s Investor Sentiment Index has been measuring Canadians’ opinions about whether it’s a good time or bad time to invest in different asset classes and investment vehicles. The index is based on a phone survey of 2,000 Canadians aged 18+. It was conducted between May 2 and May 15, 2012 by Research House, an Environics Company.
About Manulife Financial
Manulife Financial is a leading Canada-based financial services group with principal operations in Asia, Canada and the United States. In 2012, we celebrate 125 years of providing clients strong, reliable, trustworthy and forward-thinking solutions for their most significant financial decisions. Our international network of employees, agents and distribution partners offers financial protection and wealth management products and services to millions of clients. We also provide asset management services to institutional customers. Funds under management by Manulife Financial and its subsidiaries were C$512 billion (US$512 billion) as at March 31, 2012. The Company operates as Manulife Financial in Canada and Asia and primarily as John Hancock in the United States.
Manulife Financial Corporation trades as ‘MFC’ on the TSX, NYSE and PSE, and under ‘945’ on the SEHK. Manulife Financial can be found on the Internet at manulife.com.
Tracy Van Kalsbeek
Public Relations Consultant
Manulife Financial Canadian Division