BlackRock Survey: Singaporeans worry about outliving their retirement funds
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 5% 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% of Singaporeans worry about running out of money in retirement, the highest proportion in Asia Pacific. Nearly nine out of 10 Singaporeans (87%) believe they are responsible for their own retirement income. However, this realization has yet to spark action – only 68% have started saving despite the fact they save an average 15% of monthly income, the highest rate worldwide. Some 84% 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% 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.
More than 62% of millennials have begun saving for retirement
Millennials 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%) of millennials have begun saving for retirement, a significant increase from 2015 (56%). More impressively, 87% of those now saving are making additional investments beyond the mandatory CPF requirement. In fact, 27% (vs 24% of Singaporeans generally) are saving into private pension plans, and 22% (vs 18% 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%) feeling confident of accumulating adequate retirement income, while 49% 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.
Yet to fully embrace technology and professional financial advice
Singapore is home to a technology-reliant population, with online channels (55%) being the main source of investment information before financial advisers (42%) and family and friends (39%). Although most are using technology for basic functions such as information-gathering, routine monitoring and everyday banking, a fifth (20%) 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% of Singaporean respondents are willing to buy an investment online. Of this group, nearly half (46%) said they prefer to obtain professional advice either before or during a transaction, while 36% 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.”
Narrowing the retirement savings gap
While it is encouraging to see Singaporeans saving for retirement, they could do more to become smarter investors. Key to achieving financial security in later life is to take action NOW. Reducing the retirement income gap calls for the following measures to be taken:
- Start planning for retirement at an early age to offset longevity and a low-return environment
- Complement use of technology with financial advisers to strengthen knowledge and investment confidence
- Move out of cash and diversify across asset classes and/or invest in additional pension plans
Hardy said: “Investors need to periodically track and evaluate their progress against targeted savings goals, especially as they will likely spend more years in retirement than expected. It is important to make cash work harder by taking on some risk to generate desired retirement income. We find income-related products such as dividend-growing equities or high-quality debt to be popular among Singaporean investors. This can be a great means of delivering higher income than cash within diversified portfolios, without sacrificing asset growth.”
Read more about the survey findings here.
*The BlackRock Global Investor Pulse Survey is one of the largest global surveys ever conducted and surveyed 28,000 respondents in 18 markets. In North America: The US and Canada. In Europe: France, Germany, Italy, the Netherlands, Spain, Sweden, and the UK. In Latin America: Brazil, Chile, Colombia, and Mexico. In Asia: Mainland China, Hong Kong, Japan, Singapore and Taiwan. The survey in Singapore involved 1,000 respondents. The survey took place in January and February 2017 and was executed with support from the TNS Group, an independent research company.