Posted inStudies

Hong Kong and Singapore investors unprepared for retirement

As 64% say they lack understanding about how to manage the wealth transfer effectively.
Old chinese people playing mahjong game.

St James’s Place Asia (SJP) has launched a study which found 58% of Singaporeans and Hongkongers aged between 45 and 64 have not considered planning for their retirement, reports our sister publication, International Adviser.

Some 64% said they have not accounted for inflation in their financial planning.

Titled Never Too Late to Plan: Preparing for the Golden Years, the study looks at the financial hurdles faced by those in the later stages of their lives and careers, aged between 45 and 64 years.

This comes at a time when Singapore’s retirement age has increased from 62 to 63 as of July 2022, with plans to gradually raise it to 65 by 2030. Hong Kong, on the other hand, has an official retirement age of 65 years.

With an average life expectancy of 83.5 and 85.2 years in Singapore and Hong Kong respectively, this means that Singaporeans and Hongkongers are likely to spend at least 20 years in retirement.

Retirement preparation fears

The study found that 66% of Singaporeans and Hongkongers in the 45-64 age range said the fallout of Covid has made them more concerned about planning for their retirement.

As a result, 67% are worried about their ability to cover healthcare costs in their retirement with 64% expressing concerns about being a financial burden to their families.

This inaction may be due to a lack of awareness, with 59% saying they do not fully understand the financial products and services available to help them plan for retirement, as well as managing immediate financial issues spurred by the pandemic – with close to half (46%) needing to draw down from or reduce retirement contributions since the start of the pandemic.

Owing to this uncertainty, 72% of those surveyed in Singapore and Hong Kong are making lifestyle sacrifices now in the hope they can enjoy a better retirement.

In retirement, most anticipate they will need to make further spending cuts, including reducing expenditure on luxury goods (46%), social life (35%) and travel (33%).

Oliver Wickham, chief executive of SJP Hong Kong, said: “It is concerning that high levels of unpreparedness around retirement planning still persist, especially in the face of increasing economic volatility and skyrocketing inflation.

“With people spending longer periods in retirement in the future, having a sound financial plan should be priority as it can go a long way towards easing some of the associated stress and anxiety while achieving a more comfortable retirement.”

Wealth transfer

The study also found 64% of Singaporeans and Hongkongers aged between 45 and 64 lack understanding about how to manage intergenerational wealth transfer effectively, and 65% do not understand the tax implications they may face.

As a result, 57% say wealth transfer and succession planning is a source of stress in their life, and 50% say that it is causing disharmony among their family members.

A low level of action is also seen, with 60% saying they do not have a will, while a far higher number (83%) have life insurance. Close to half (46%) have not made any plans to transfer their wealth or assets to family members, but 44% of these people say they plan to do this within the next five-to-10 years.

A strong trend is also seen in donating wealth to philanthropic causes, with 42% planning to do this. While 84% say their family members are aware of these wishes, having a will in place can ensure that the distribution of assets is managed according to the person’s wishes while minimising the possibility of disputes arising amongst family members.

Gary Harvey, chief executive of SJP Singapore, said: “Wealth transfer and succession planning unfortunately comes with many potential planning and emotional pitfalls that one must be carefully prepared for. While having wealth transfer conversations with loved ones can be challenging, it is an important first step towards ensuring peace of mind and avoiding major issues.

“The high number of Singaporeans over 45 who still do not have a will is deeply concerning and may be due to people wanting to avoid tough conversations or delaying thinking about the inevitable.

“Seeking professional, third-party financial advice can help alleviate this stress and provide clarity and assurance to all involved that their commitments and wishes can and will be met.”

Part of the Mark Allen Group.