Non-retired investors globally are saving an average 11.4 per cent of their salary specifically for retirement, a major new study has found.

However, the research, which covered 30 countries, also found two-thirds (66 per cent) of retired investors wished they had put away more.

The Schroders Global Investor Study (GIS) 2017, which surveyed more than 22,000 people who invest, found the proportions of income saved for retirement were highest on average in Asia, at 13.0 per cent, and lowest in Europe, at 9.9 per cent. In the Americas, the average investor saved 12.5 per cent of their income for retirement.

Lesley-Ann Morgan, head of retirement at Schroders, said: "It's well known that people aren't saving enough for retirement but this study shows that even those who are already established investors are not putting away enough money."

"There's also a strong message from those who have already saved: "I wish I had saved more."

"The pension savings gap is further compounded by the fact we're in an age of low rates and low returns. To reach their goals, people will need to save even more than savers did in previous generations.

"The study shows investors globally are only putting away 11.4 per cent of their income but say they want to retire at age 60. Our analysis shows that someone who started saving for retirement at age 30 is likely to need savings of 15 per cent and above a year if they wanted to retire on 50 per cent of their salary."

How much do I need to save to retire?

The level of retirement income that savers can expect depends on:

• The amount contributed (and when),

• The returns achieved,

• How the money is invested after retirement,

• The length of time over which money will be withdrawn.

The chart below sets out analysis undertaken by Schroders. It assumes a starting age of 30 with a £35,000 salary that rises in line with inflation. It shows the real annual returns--where inflation is taken into account--that would be needed to achieve two levels of income: 50 per cent or 66 per cent of your salary when you retire. These are typical bands that people aim for. It also assumes they will draw on the money for 18 years, on average.

How much savers need to save, depending on returns achieved

Source: Schroders Retirement

So, if a saver contributed 15 per cent of their income, they would require an average annual real return of 4.3 per cent (the middle column) to achieve a retirement income worth 50 per cent of their income.

If they contributed 10 per cent of income, however, they would need a return of 6.9 per cent, a level higher than the long-run return on equity markets.

Past performance offers no guarantee of future returns but today's low-rate world could mean investments pay less than they have done in recent decades.

However, the Schroders Global Investor Study also found respondents remained optimistic on the outlook for returns. Globally, investors anticipated their investments would return 10.2 per cent a year on average, over the next five years. Schroders economics team's long run expectation (30 years) for equities is inflation plus 4 per cent.

Returns are also influenced by how much risk is taken with a portfolio, which in turn dictates the type of assets that are bought.

However, the study also found that investors are currently averse to taking too much risk due to the uncertainty caused by international events:

• 59 per cent do not want to take on as much risk in their investments now,

• 48 per cent have put more money in cash than they had before.

Schroders' Lesley-Ann Morgan said: "People in some countries tend to invest more cautiously and may therefore see lower returns. In Germany, for instance, pension savers have a preference for bonds, which typically have delivered lower returns."

"Such savers will need to contribute even more to ensure they realise their retirement goals.

"The most powerful tool available to savers is time. Start saving at an early age and it makes an incredible difference to the eventual size of your retirement account. The miracle of compounding, where you earn returns on your returns, adds up over 30 or 40 years of saving."

Do investors know they need to save more?

Globally, 66 per cent of retired investors said they wished they had invested more for their retirement. But non-retired investors did acknowledge the need to do more.

They thought they should be saving an average of 13.7 per cent of their income in order to live comfortably in retirement, higher than the 11.4 per cent average they say they are currently investing.

The biggest difference between what people were saving and what they thought they should be saving was in Chile, at 10.7 per cent versus 19.0 per cent.

The smallest difference was in Denmark where investors thought they should be saving 12.0 per cent and were actually saving 11.6 per cent.

Indonesians save the most

On average, Asian investors were investing the highest proportion of salary for retirement. Investors in Indonesia and Singapore were saving 15.4 per cent and 14.6 per cent of their incomes, respectively. South Koreans were saving the least, in Asia, putting aside 10.2 per cent.

As a percentage of their income, Europeans were investing the least for retirement. Russian and Spanish investors said they were saving 8.6 per cent, on average. At the other end of the scale, Danish and Swedish investors were investing the most at 11.6 per cent and 11.5 per cent, respectively.

Within the Americas, US investors were saving more of their salaries for retirement than Canadians, 13.5 per cent versus 11.2 per cent.

Are you saving enough for retirement?

Source: Schroders Global Investor Study 2017

When will I retire?

Globally, non-retired investors said they expect to fully retire at an average age of 63.0 but would like to retire almost a full three years earlier at the age of 60.2. However, retired investors said they had expected to fully retire at the age of 61.1 but actually retired at 59.4.

Non-retired Europeans are less optimistic on retiring earlier. On average, they expect to fully retire aged 64.5 years old compared with age 61.0 for Asians. Italians are most pessimistic about an early retirement. They expect to retire at 67.5 years of age. Thai investors are most optimistic and expect to at 58.0.

The state pension age within countries can affect thinking about when the right age is to retire.

Are we still too reliant on the state pension?

Investors are still relying on the state to provide a significant proportion of their retirement income. Globally, on average, investors expect the state to contribute (or for retired investors it actually does contribute) nearly a fifth (18.5 per cent) of their income in retirement. That figure was highest in Europe (25.6 per cent) and lowest in Asia (12.8 per cent).

More results on retirement expectations are published in the full report. The links below take you to other elements of the Schroders Global Investor Study 2017.

• Investors expect returns of 10.2 per cent with millennials hoping for more

• US outranks Europe in Schroders sustainability league table

• Profit versus impact: investors choose sustainability for better returns

• How people are prioritising investing over property and savings

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The same thing happens when we're making important choices--like how to invest our money.

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Take the investIQ test in less than eight minutes. Go to Schroders.com/investIQ

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David Brett is an investment writer with Schroders. This is a financial news article to be used for non-commercial purposes and is not intended to provide financial advice of any kind. Opinions expressed herein are subject to change without notice and may differ or be contrary to the opinions or recommendations of Morningstar as a result of using different assumptions and criteria.

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