Focus on emerging markets – How Asians put greater reliance on investments for old age

A large opportunity is opening up for asset managers to offer long-term savings funds into emerging Asian markets as the traditional model of families or the State supporting retirees looks set to break down in just one generation.

The region’s populations are characterised in the Western imagination as having large families supporting the elderly and retired.

But the reality will be quite different, according to data from a survey in the region by Washington DC’s Center for Strategic and International Studies.

The proportion of respondents expecting to depend on their children’s income in retirement is typically half or less of the proportion of those already in retirement and able to depend on their children.

The poll covered six countries – China, Hong Kong, Malaysia, Singapore, South Korea and Taiwan.

In each country the proportion expecting to retire before 60 was markedly higher than the proportion that already had. The difference was widest in South Korea (68% versus 27%), but also pronounced in Taiwan (68% versus 39%), Singapore (64% versus 43%), and China (70% versus 52%).

At the same time, portions of those expecting to live off stocks and bonds was greater than proportions that already did, for each country. The increase was most marked in China (only 4% do, but 24% expect to).

And in each country at least 79% (China) said the government should compel people to save more for retirement.

But in all countries except China and Malaysia, the portion of those saying retirees themselves should take most responsibility for providing income to retired people outweighed the portion saying the State should take on this task.

Whoever takes on the task, it will be a long-term one – as the average life expectancy is 80 years or more in all countries except China (74) and Malaysia (75).

Those approaching retirement may be witnessing the deteriorating levels of income of their elders. In Hong Kong, for example, 59% of respondents say they have “a lot less income” than while they were working. Only 7% reported having more.

The findings seemed to point to a willingness for individuals to act themselves, using traditional investment products, to finance their own old age.

“As societies worldwide age, the challenge for governments and businesses is to anticipate and meet the needs of tomorrow’s growing elderly populations,” said the authors Richard Jackson and Neil Howe.

“The challenge is especially daunting in East Asia, because the region faces onrushing age waves while it is still developing and modernizing. How decision makers deal with that challenge will have important implications not just for the future prosperity of their own countries, but for future global prosperity.”

“Responding to the challenges caused by an aging population is critical to Asia’s future. It is critical that policy makers and the industry work together to address this vital question,” said Donald Kanak, chairman of Prudential Corporation Asia

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