Singaporeans worry about outliving retirement savings
BlackRock’s survey reveals Singaporean investors face a retirement savings gap as large as six years.
Singaporeans are not doing enough to prepare for retirement, according to BlackRock’s Global Investor Pulse Survey 2017. The discovery comes at a time when insufficient funds for retirement has become an increasingly pressing concern worldwide, in light of today’s low-yield environment.
BlackRock’s annual survey polled 28,000 people throughout 18 markets – including 1,000 in Singapore – by asking questions on financial and investment management and the likely impact on their retirement. Kevin Hardy, BlackRock’s country head of Singapore, said: “It is promising to find that Singaporeans are acutely aware of the need to save for retirement and worry about not saving enough. This mindset is essential when seeking to reduce the retirement savings gap, which is caused partly by today’s low-yield environment.”
He added: “Singaporeans’ expectation of a five-percent annual investment return seems reasonable compared with their regional peers, but underestimating their life expectancy is the other caveat to address as they plan for retirement. This is especially important for women who are normally expected to live longer than men.”
Results showed 64 percent of Singaporeans worry about running out of money in retirement, the highest proportion in Asia-Pacific. Nearly nine out of 10 Singaporeans (87 percent) believe they are responsible for their own retirement income. However, this realisation has yet to spark action – only 68 percent have started saving despite the fact they save an average 15 percent of monthly income, the highest rate worldwide. Some 84 percent are saving beyond the mandatory requirement of the Central Provident Fund (CPF), or in other forms of savings plan. But it is clear respondents are underestimating how much they will need for retirement, in many cases by as many as six years.
Singaporean investment leans heavily on cash – 47 percent on average, which is slightly higher than in other parts of the region but much lower than the rest of the world – meaning Singaporeans may not be able to achieve enough income from their existing portfolios.
Millennial concerned about becoming a burden
Also, interestingly, millennials (those between the ages of 25 and 35 as at 2017) in Singapore demonstrate a high awareness of the need to save for retirement, and are concerned about outliving their savings and becoming a burden to their families.
Nearly two-thirds (62 percent) of millennials have begun saving for retirement, a significant increase from 2015 (56 percent). More impressively, 87 percent of those now saving are making additional investments beyond the mandatory CPF requirement. In fact, 27 percent (vs 24 percent of Singaporeans generally) are saving into private pension plans, and 22 percent (vs 18 percent of Singaporeans generally) are making further voluntary contributions to the CPF. This represents the highest proportion across all age groups in both categories.
Sentiment is generally positive amongst millennials, with half (50 percent) feeling confident of accumulating adequate retirement income, while 49 percent are confident of making retirement-focused investment decisions (scoring higher than the average among respondents in Singapore). This indicates positive investment behaviour from the younger population.
Not fully embracing technology and professional financial advice
Singapore is home to a technology-reliant population, with online channels (55 percent) being the main source of investment information before financial advisers (42 percent) and family and friends (39 percent). Although most are using technology for basic functions such as information-gathering, routine monitoring and everyday banking, a fifth (20 percent) of Singaporeans find technology helpful in monitoring their retirement prospects. This is seen to be providing motivation to adjust spending patterns, retirement dates, income expectations and portfolios.
In fact, 64 percent of Singaporean respondents are willing to buy an investment online. Of this group, nearly half (46 percent) said they prefer to obtain professional advice either before or during a transaction, while 36 percent need reassurance from a trusted brand. It becomes evident that financial advisers and technology are used as complementary sources of information when Singaporeans make investment decisions.
Hardy said: “Technology provides ease of access to information and can be a useful tool in enhancing financial knowledge – but the human component should not be ignored. Ability to harness the potential value of both technology and face-to-face financial advice will generate greater confidence in long-term investing, as Singaporeans build their desired retirement income.”