Pinoys not saving enough for retirement needs – survey

MANILA, Philippines - British banking giant Hongkong and Shanghai Banking Corp. (HSBC) in  a survey said most Asians, including Filipinos, do not have enough savings for their retirement  needs  and warn of ‘’potential financial crisis in later life.’’

In a survey titled HSBC’s Future Retirement: A New Reality, the bank said ‘’Asians expect their retirement savings to run out halfway through their retirement, as they estimate their savings to cover only 10 years out of the 18 years they expect to live in retirement, suggesting a potential financial crisis in later life.’’

HSBC’s survey covered over 15,000 individuals in 15 markets globally.

HSBC senior vice president and head of retail banking and wealth management Gigi Pio De Roda said: “Increased longevity is one of the most important issues challenging societies today.”

By 2050, the survey estimated that there would be one person over 65 years old for every six people aged 15-64 in Indonesia and the  Philippines, nearly thrice the number in 2010. The median  age will rise to over 30 years old in 2050, from around 20 in 2010.

 â€œHSBC’s survey shows that while people aspire to a positive retirement, in reality, there is a clear gap between how much people are saving and how much they actually require in later life,” the survey said.

It further noted that living expenses and major life events push retirement savings down people’s priority list while ageing, weak social safety nets and changing pension schemes will continue to add pressure to retirement planning.

Shifting economic and social trends, it said, require people to think differently about retirement and prepare for the unexpected.

On retirement aspirations and fears, the HSBC survey noted that Asian respondents, on an average, think they need nearly $40,000 per year for a comfortable retirement, slightly higher than the global average of around $35,000.

Globally and in Asia, respondents say they will require around two thirds of their ‘working age’ income to achieve a comfortable retirement.

“Spending more time with friends and family and frequent holidays are generally cited as the most popular retirement aspirations, whereas poor health and financial hardship are regarded as the biggest fears by Asian respondents,” it noted.

HSBC also cited some of the obstacles that retirees face with regard to saving for their future.

It noted that across Asia, people started to save at 27 years old on average and started to plan for retirement at 29.

Of those who have never saved for retirement, HSBC said about 37 percent of respondents on average cite day-to-day living cost as a key reason.

Moreover, the survey shows that the ability to save for retirement is significantly affected by life events, such as the cost of property or mortgages, which is the most significant event that derails Asians’ efforts to save.

“While respondents expect to use a variety of sources to fund retirement, the largest proportion is likely to come from cash savings,” it further noted.

Pio De Roda added: “Cash remains a big part of Asians’ wealth portfolio. Building up savings for retirement can provide the benefit of diversification and the flexibility to capture growth opportunities in the market as well as to adjust their investment strategy to evolving personal circumstances.”

She also said that “an over-reliance on cash savings may increase the risk of a retirement income shortfall amidst today’s extremely low interest environment. Moreover, inflation in emerging markets also remains a real threat to bridge retirement income gap.”

HSBC noted that planning early and taking professional advice may lead to increased savings.

“The majority of Asians or 74 percent take a self-directed approach in planning, using their own knowledge and calculations,” it said.

However, the survey shows that there is a positive relationship between financial planning and saving levels, with 60 percent of Asian respondents who have taken professional financial advice claiming that they have saved more as a result.

Pio De Roda said: “The strong savings culture among Asians is a key advantage, but a structured and discipline approach guided by a professional financial adviser will help people start or catch up on their retirement savings.”

“Financial planning is vital to achieve retirement goals and is especially relevant as increased longevity challenges people’s financial security in later life,” she added.

The bank executive said: “HSBC is committed to being trusted partners to our customers, leveraging our insight, expertise and world-class wealth management solutions, to help them achieve a positive retirement and long-term prosperity for their family.’’