AllianzGI: HK’s Working Population Seek Return to Bridge the Retirement Gap as Saving Alone Can’t Save their Future

02/04/2014

Despite saving 20% of income, financial security in retirement is five times more important than bonding with families for today's working population in HK

Hong Kong's working population are prepared to save or invest more to bridge their retirement reality gap. However, discipline and knowhow in investing, not just saving will be key to success, according to the inaugural Allianz Global Investors ("AllianzGI") Retirement Confidence Survey released today.

At the launch of a year-through retirement planning and education campaign, the AllianzGI Retirement Confidence Survey looks into the changing perceptions, concerns and behaviours amongst individual towards retirement especially at the time when the city has officially become an "aged" population, following Japan.

Elvin Yu, Head of Institutional Business, Greater China and South East Asia commented, "The survey helps us understand that while the average Hong Kong worker is looking for a relatively practical and modest lifestyle in retirement, the average minimum amount required for retirement (i.e. less than HK$5 million) really keeps them awake at night. As the cost of living in Hong Kong continues to rise, it is clear that income from existing pension systems will only cover the tip of the iceberg of costs for today's working population when they retire. To "plan for your future, today" is therefore more important than ever especially for those who want financial security upon retirement."

Financial assets and property: sources of [in]security for retirement

When asked about what defines an ideal retirement lifestyle, the majority of Hong Kong's working population cited financial security with sufficient assets (64%) and a property (56%) as the most critical component relative to other fulfilments in life (traveling: 31%; pursuing personal interest: 33%; and even bonding with children and grandchildren: 12%). At the same time, financial independence with minimal support to (35%) and from (11%) children also seems to play a key role to an ideal retirement.

As much as financial security is important to the respondents, many of them feel financially insecure when it comes to retirement. Only one third (34%) of the respondents are confident that they can acquire sufficient financial assets, and less than one third (30%) of those who do not currently own a property believe they are likely to own one by the time they retire.

"Generation Y", "property-less" and "kid-less" suffer from the widest retirement reality gap

The lack of financial confidence is further endorsed by the significant retirement gap between the amount Hong Kong working population wish and expect to accumulate by the time they retire.

Based on the survey findings, an average Hong Kong worker with a monthly income of HK$29,000 typically expects to accumulate up to HK$3.1 million by the time he or she retires, which equals to close to HK$10,000 monthly savings on top of the standard MPF scheme. Setting inflation aside, the amount would still be 37% (HK$1.8 million) less than needed for an ideal retirement (i.e. HK$4.9 million).

Specifically, the following three groups stand out with their retirement concerns and reality gap:

"Even for individuals with decent monthly income and regular savings habits, their ideal retirement still seem to be a fantasy from a funding perspective. An average individual who makes HK$ 29,000 per month would need to increase their monthly savings up to HK$16,000 in order to reach his ideal retirement amount, which is more than half of his monthly income. It is reasonably fair to say that relying on savings alone will not get you anywhere close to your ideal retirement," Elvin continued.

Discipline and knowhow to investment is key in bridging the gap

When asked about what actions to be taken to bridge the retirement gap, the majority of Hong Kong workers acknowledge saving or investment (73%) is the way to go as compared with cutting back on existing living expenditure (30%) or delay in retirement (40%). Interestingly, Four out of five (78%) generation Y are prepared to save or invest more, which is the highest amongst all age groups.

Looking into their savings and investment behaviour, respondents on average dedicate almost 20% of their monthly income to savings and investment respectively:

"When it comes to growing your financial assets for retirement, discipline and knowhow are key. As a multi-asset investment manager, we encourage those who care about their retirement to constantly review their pension and investment portfolio to ensure they are in line with your risk reward profile. Discipline in asset and risk diversification are critical to achieve return amid the increasingly volatile economic cycle. Upon retirement, one should also look into ways to stay invested in order to seek stable yields and keep growing assets in a long run," Elvin concluded.

During the period from December 2013 to January 2014, a total of 806 working adults aged between 25-54 were interviewed online through Yahoo Hong Kong, a portal which reaches 95% of Hong Kong internet users (Source: comScore Media Metrics February 2014). Among the respondents, 51% are males, 49% females. 43% are aged 25-34, 42% are 34-44, and 15% are over 45 years old. Over 60% of the respondents are well-educated with university or above.

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