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Financial hangover from global economic crisis undermines Asians’ retirement savings

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Asian workers plan to save 25%, on average, of their annual income for retirement, more than workers in the UK (11%), the US (14%) and UAE (11%) plan to do, according to HSBC.

The bank’s Future of Retirement: A balancing act report reveals that the numbers peak at 31% in Hong Kong, followed by Taiwan at 30% and Singapore at 29%. 

However, saving enough for a comfortable retirement has been difficult, revealed the report which surveyed more than 16,000 people in 15 markets worldwide. Workers’ ability to save for retirement continues to be threatened by the long-term effects of the economic recession and other life events. 

More than eight in 10 (83%) of Asian workers say the economic recession and other life events, such as buying a home and funding children’s education, have significantly impacted their ability to save for retirement. More than one third (37%) of Asian pre-retirees stopped or reduced their retirement savings during downturn. The global economic downturn has hit retirement saving hard and the long-term impact will be felt for many decades to come. 

Two thirds (69%) of Asian pre-retirees are already concerned that they will not have enough money to live day to day upon retirement, while 71% fear that they will run out of money altogether. 35% of Asia pre-retirees say they are not preparing adequately for a comfortable retirement. 

Commenting on the findings, Vineet Vohra, Global Head of Wealth Insights, Retail Banking and Wealth Management, HSBC, says: “Our survey shows that even with the strongest intensions, Asian workers are struggling to get back to saving mode for retirement even as the global economy slowly recovers. Like a bad hangover, the recent downturn has left people to prioritise other financial obligations such paying off the mortgage, funding education and day to day expenses. It doesn’t have to be this way. With early and careful planning and the discipline to save and invest regularly, people can meet their broad range of needs, including saving for retirement.” 

Globally, workers are expected to face a seven-year savings gap, in which for an average 18-year retirement, workers worldwide expect to run out of their retirement savings and investments (excluding pensions) after only 11 years. 

To fill their retirement pots, Asian workers are confident that cash deposits (72%) and a second property (69%) are good ways to generate income. Asian workers either already own or plan to own second properties in their home country (71%) and overseas (35%). Nine out of 10 workers in Indonesia (90%) and India (87%) plan to fund their retirement though second domestic properties. 

Interestingly, more unconventional supplementary sources are also coming to the fore, particularly in Asia. 62% of workers in Asia compared to half (52%) of workers worldwide plan to rely on returns from gold, jewellery or diamonds to support their retirement. The numbers turning to jewellery, diamonds and gold peak at 92% in Indonesia, followed by 86% in India and 76% in Malaysia. 

Vineet Vohra says: “Our research shows that many people are not only building their retirement pots via traditional financial products but also through physical assets, which is especially true for Asians. While it is prudent to accumulate a variety of assets to fund retirement, it is also important to make sure there is an appropriate mix of growth and income assets, based on one's risk profile. People tend to have a strong preference for holding cash, but the purchasing power of cash is likely to be eroded by inflation over the long term. Diversification is key to managing risks that may come from inflation or market volatility.

“To minimise the impact of unexpected events, such as unemployment on retirement funds, pre-retirees may consider some protection plans or other investment solutions to address specific needs. By planning early and investing suitably, retirement is not necessarily a challenge but a time for people to enjoy their life, with financial independence. “ 

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