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AllianzGI Survey finds four key attributes – “early planning”, “disciplined with savings”, “risk-taking” and “eagerness to learn” that lead to higher retirement confidence

14/08/2018

 

  • Hong Kongers’ total expected ideal retirement funds is at HK$5.048 million, with the gap between expected and actual retirement funds being HK$1.830 million. The planned retirement age has also reached a new record high of 62.4
  • Respondents anticipate their retirement savings to sustain an average of 14 years as greater monthly retirement contribution has been made than before, with 35% of respondents contribute more than HK$6000 a month
  • Given expected retirement age and funds have increased further, 70% of respondents show low to average confidence level towards their ideal retirement life
  • Entrepreneurs display the highest confidence level among all segments, which is reflected by their retirement fund preparedness, early planned retirement age and high expectation towards post-retirement quality of life
  • Awareness of annuity concepts and products is low among respondents, with a lack of incentive to participate in the scheme
  • “Early planning”, “disciplined with savings”, “risk-taking” and “eagerness to learn” are the four key attributes that set entrepreneurs apart, which individuals can practice in order to achieve higher retirement confidence
  

Allianz Global Investors (AllianzGI) released its fifth annual Retirement Confidence Survey today. The results show that Hong Kongers’ expected ideal retirement funds is at HK$5.048 million, which stays at around similar level compared to last year. However, the gap between expected and actual retirement funds has been widened from two years ago to HK$1.830 million (2016: HK$1.189 million).  

Following the trend in recent years, Hong Kongers have further postponed their planned and ideal retirement ages slightly to 62.4 and 61.6 respectively, reaching a new record high. The widening gap between the two has also risen by 0.8 year this year, reflecting low confidence level among pre-retirees and their expectation to work longer before retiring. 70% of respondents show low to average confidence level towards their retirement life, in which females (75%) and the younger generation (aged 25-34) (74%) display the least confidence.  

With the rising living cost and inflation, the anticipated monthly spending after retirement has increased to HK$16,950 (2017:HK$15,833). Respondents anticipate their retirement savings to sustain an average of 14 years of retirement life given greater monthly retirement contribution has been observed, with 35% of respondents contribute more than HK$6000 a month (2017: 31%). In contrast, younger generation tends to underestimate the importance of disciplined saving. Only 26% of respondents aged 25-34 contribute more than HK$6,000 a month, the least among all segments.  

According to the survey results, entrepreneurs demonstrate the highest retirement confidence level and are the most prepared segment for retirement. The gap between expected and actual retirement fund by entrepreneurs is the smallest, with only HK$1.542 million. 21% of them state that their retirement funds can support more than 20 years of retirement life, showing their preparedness and engagement with retirement preparation. Moreover, they expect to retire at the age of 61.3, around 1.2 years earlier than other employees while 26% of them expect retirement living will be better than now, indicating high expectation towards post-retirement quality of life.  

AllianzGI Head of Institutional Solutions, Asia Pacific Philip Tso said:

“The high envision towards retirement life among Hong Kongers cannot happen without thorough preparation. Success always comes to those who plan early and are not afraid to take risks while seize opportunities at the right moment. The high confidence level of entrepreneurs towards their retirement life not only stems from their discipline in saving and regularity in reviewing as well as adjusting their portfolio, but also the eagerness to educate themselves with latest market trends and to understand the benefits of various retirement products. Four key attributes have been identified and have set entrepreneurs apart, in which individuals can practice in order to achieve higher retirement confidence.”  

Four key attributes leading to higher retirement confidence  

1. Be an early bird – you snooze you lose

  • By starting early, individuals can take advantage of compound earnings to achieve their financial goals and to enjoy a wider choice of investment options.
  • Entrepreneurs start retirement planning at 46.3 years old, the earliest among all segments
  • 70% of entrepreneurs have already started planning for retirement (entrepreneurship considerers: 61%; rejecters: 56%) while 43% have already planned on how to use their retirement benefits

 

2. Stay focused, dedicated and disciplined

  • Achieving retirement goals require disciplined saving, spending and investing. Aside from having a comprehensive financial plan, individuals should also review their retirement assets and portfolio regularly, which help preventing saving gaffes and ensuring sufficient funds are available for emergency.
  • Entrepreneurs save HK$5,545 per month on average for retirement on top of their retirement contribution (entrepreneurship considerers: HK$4,888; rejecters: HK$5,189)
  • 85% of entrepreneurs review their retirement benefit accounts while 67% of them adjust their accounts at least once a year (entrepreneurship considerers: 55%; rejecters: 42%)

 

3. Willing to take risks, with long term vision

  • With long-term financial goals in place, it is vital to take reasonable risks based on age and risk tolerance as returns from safe investments may be so low that they are unable to keep pace with inflation
  • Entrepreneurs are more receptive to risk. 55% of them can accept a loss of up to 15%, compared to 41% of entrepreneurship rejecters

 

4. Stay hungry to learn

  • Entrepreneurs are inquisitive and eager to learn about the latest market trends and various retirement options. Thus they are naturally in a better position to select suitable retirement products and approach that are best aligned with their long-term financial objectives, as well as to seek good investment opportunities and assess risks
  • 75% of entrepreneurs consider themselves understand the risk level of their retirement benefits while 36% of them understand annuity and related products well (entrepreneurship considerers: 28%; rejecters: 24%)
  

Hong Kongers generally have low awareness of annuity concepts, especially with regards to annuity rate, midway surrender mechanism and internal return rate. Moreover, over 50% of respondents either do not plan to join annuity or have not made a decision yet. This shows that the public is lacking incentives to participate in the annuity scheme together with their shallow understanding on annuity products.  

“Given annuity is a relatively new concept to the public, education on its benefits is essential and necessary. The working population, whether entrepreneurs or employees should consider annuity as an additional layer for retirement protection, as well as an alternative long-term investment option aside from the MPF scheme as it guarantees fixed return and ensures steady source of income to address longevity risks, allowing pre-retirees to achieve their ideal retirement life”, added Tso.

 

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