Fund managers and advisers would be best served to target clients in Taiwan and China when it comes to providing for their retirement needs, finds a global study.
In an HSBC retirement survey based on interviews with 15,000 people across 15 countries, 74% of respondents in Taiwan and 70% in China said they saved more as a result of seeking professional advice. That compares with a global average of 55%.
In fact, of the seven markets in Asia-Pacific that the survey covered, only Australia fell below the global average, at 54%. India placed third on 61%, followed by Malaysia (60%), Hong Kong (58%), and Singapore (55%).
In other words, two of Asia’s most developed financial hubs and wealth centres, Hong Kong and Singapore, scored bottom in this category.
The survey found positive correlation among most Asian respondents between drawing up financial plans, via online tools or to-do lists, and savings levels.
While the ability to save via financial planning varied across Asian markets, this too was above the global average of 44%. In Taiwan, 64% of respondents claim they save more effectively via personal planning, followed by China and India (55% and 54%, respectively). Australia delivered the lowest score in this regard at 41%.
But the study also found that Asians have a higher estimation of the annual expenditure they need to live comfortably in retirement ($40,000), against a global average of $35,000.
This means Asians estimate that more than half of their “working age” average income will be needed to help fund their retirement.
The figures across the region vary, from India (98% of annual income, or $30,000) to 66% in Singapore and Australia ($49,000 and $60,000, respectively). This compares to a global average of 78% of annual income.
What, perhaps, should serve as the starkest warning to Asians is that retirees across the region will be able to finance an average of just eight out of an expected 18 years of retirement, raising uncomfortable questions about how they will be able to cope.
Even worse, this 10-year funding shortfall will coincide with a time in their lives at which health and long-term care costs rise.
“People aspire to a positive retirement filled with leisurely pursuits,” notes Louisa Cheang, regional head of retail banking and wealth management at HSBC. “In reality, there is a clear gap between how much people are saving and how much they require to maintain their living standards in retirement.”
More than half the respondents in Hong Kong and Singapore admit they are not preparing adequately, or at all, for retirement, blaming day-to-day living expenses such as property/mortgage payments.
It appears they are relying on cash savings most of all to fund retirement, with the proportion ranging from 21-34% across surveyed Asian markets. Australia and China were the exception, where people are more likely to rely on state pensions, says HSBC.
The bank pointed to the increased risk of income shortfall from an over-reliance on cash, with inflation and low interest rates eating into the value of savings.
Allianz GI announced yesterday it is on track to launch an RMB money-market fund on its Hong Kong’s Mandatory Provident Fund (MPF) platform.
The Hong Kong-domiciled fund has already been launched for institutional, family office and corporate clients, with an initial fundraising target of Rmb15 million. It is awaiting authorisation from the Mandatory Provident Fund Schemes Authority.
It will largely invest in money-market securities, but may invest into dim-sum bonds that mature within a year. Its target annual return is 2-2.5%, above the city’s 0.5% bank deposit rate.
“We could start small and hopefully over time, with more institutions and [if we] get it on the MPF platform, we will see more inflow,” says Elvin Yu, head of institutional business for Greater China and Southeast Asia at Allianz GI.