BoI Index shows greater optimism about retirement

  • One third of people say it will be ‘easy’ for them to live comfortably in retirement
  • Savers split down age lines – 46% of under 50s feel it’s a good time to save compared to only 35% of over 50s
  • Trade, geopolitics cools May investor sentiment despite rising stock markets

The Bank of Ireland/ESRI Retirement Optimism Index, which tracks how confident Irish people feel about their financial prospects in retirement increased to 104 points in May, the highest since the launch of the Index. May’s results showed that 57% of Irish people have some financial plan in place for retirement, the highest response since the question was initially asked in November 2017. The improvement was particularly visible amongst people under 50 where almost half (49%) answered that they had some retirement planning in place.

May’s results also showed a rise in the number of people that felt they could live comfortably in retirement from a financial perspective. Overall one-third of people felt that it would be easy to live comfortably in retirement and again this increase was led by the under 50s. 31% of under 50s felt they could live comfortably in retirement, slightly lower than the 34% response for over 50s.

Commenting on the findings, Tom McCabe, Bank of Ireland Investment Markets said: “May’s Retirement Optimism Index showed a greater degree of confidence amongst Irish people around retirement planning. The results may be the first evidence that improving household finances are allowing Irish people turn their attention to longer term retirement planning issues now, in much the same way as they have boosted shorter term savings in recent years.

“The improvement in confidence among under 50s is particularly encouraging. However the proportion of this group with some retirement planning in place was still less than 50% and ideally this number should be higher. Without a doubt younger people have the unenviable task of juggling numerous competing financial goals of which retirement planning is just one. However, where possible they need to stay focused on this particular goal in order to secure a reasonable income in retirement.”

The Retirement Optimism Index was tracked alongside the Bank of Ireland/ESRI Savings and Investment Index, which was unchanged at 101 in May 2018. Whilst the Savings Index increased slightly, this was countered by a cooling in sentiment towards investment on the back of ongoing concerns about a global trade war and rising political instability in the Euro zone.

Savings Index

The monthly Savings Index increased to 104 in May from 103 in April driven by a slight rise in the Savings Attitudes sub-index. Saving patterns remained strong in May with 51% of people saying they saved regularly and another 18% answering that they saved occasionally. Regular savings patterns remained particularly strong amongst the under 50s with 57% of this group answering that they regularly put money away.

In the Savings Environment sub-index 42% of people felt it was a good time to save in May, up from 39% in April. However there was a marked divergence in views on this across the age groups. Only 35% of over 50s felt it was a good time to save, a full 11% lower than the response from under 50s. This likely reflects continued dissatisfaction among older lump sum savers with the returns on offer from deposits.

Investments Index

Like its savings counterpart, the Investment Index measures peoples’ attitudes towards investing and how they view the investment environment. The monthly Investment Index decreased to 98 points in May from 100 driven by a fall in the investment environment sub-index.

After rising considerably in April, peoples’ views on the investment environment weakened again in May. The spectre of rising political instability in Italy and Spain, the US exit from the Iran nuclear deal and continued concerns about a global trade war all seemed to weigh on investor sentiment in the month.

The percentage of people that saw it as a good time to invest slipped to 30% in May compared to 34% in the previous month. However a larger percentage (34%) felt it would be a better time to invest in six months time, suggesting that Irish people feel that these geopolitical and trade threats should fade in time.

Commenting on the Investment Index, Tom McCabe, Bank of Ireland Investment Markets said: “At first glance, it is a little surprising that Irish peoples’ views of the investment environment weakened in May, the strongest month so far this year for stock market returns with a gain of 3.6%.

“However the continued whiff of a global trade war certainly poses a risk for the global economy. Furthermore, the political uncertainty in Italy, the sharp spike in Italian borrowing costs on world markets and even some murmurs of ‘Itexit’ in May were all queasy reminders of the 2011 Euro zone debt crisis. Given how painful this period was for Irish investors, perhaps it’s not that surprising that Irish investors chose to see the glass as half empty rather than half full in May.”