Covid-19 raised Hongkongers’ sense of urgency in starting their retirement planning, significantly higher investment return expectations observed: Schroders survey
The Covid-19 pandemic raised a sense of urgency in starting their retirement planning among Hongkongers who have yet to retire as they grapple with various related woes, a Schroders survey has found. On average, in 2024, planning for retirement began at age 40, compared to 45 in 2018.
Non-retired Hongkongers have significantly higher expectations for investment returns post-Covid: 5.7% in nominal returns annually, up from 3.7% per year in 2018 – according to Schroders Hong Kong Retirement Survey 2024.
Higher healthcare costs than expected (76%), inflation reducing the value of assets (73%), and a potential prolonged recession affecting their life and career (72%) – which may affect their ability to accumulate wealth for retirement – are the top three retirement-related concerns among respondents.
Shift in attitudes towards retirement planning post-Covid
The survey indicates shifted attitudes towards retirement planning in Hong Kong post-Covid. There is heightened eagerness to prepare for their future: Nearly half (48%) of those surveyed said they feel more strongly that there is an urgency to save for potential healthcare needs after retirement now compared to pre-Covid.
In addition, 46% and 38% respectively have become more in agreement with the importance of effective wealth management in retirement planning and making sacrifices in their current lifestyle as part of their retirement plan.
Meanwhile, it is alarming that some respondents live in the present and are prioritising experiences even more now over financial security in the future. Over one-third (36%) indicated that they agree more with the statement that investing in immediate experiences holds greater importance than saving for retirement today compared to pre-Covid.
HK$2.4 million gap between desired financial reserves for retirement and expected expenditure
Overall, Hongkongers are still underestimating the longevity effect and are in reality more likely to outlive their assets. Whilst post-retirement years in Hong Kong average 22 years, the respondents in the survey expect only 15 years of retirement on average, according to the survey findings.
There also appears to be a potential shortfall in financial preparedness for retirement among non-retirees. The survey points to an average HK$2.4 million gap between desired financial reserves for retirement and expected expenditure.
Furthermore, when reflecting on their retirement plans, only 1 in 2 (53%) of non-retired Hongkongers surveyed feel confident they will achieve their desired financial reserves by the time they intend to retire. The median intended retirement age is 62.
It is no surprise, therefore, that 73% of non-retired Hongkongers are prepared to work in retirement, compared to 40% of their US counterparts.
Lesley-Ann Morgan, Global Head of Pensions and Retirement at Schroders, commented:
“While many Hongkongers are willing to work in retirement, our global experience in pensions investment suggests that working longer isn’t necessarily a solution in full to financial shortfall. It would do well for pensions members to be more proactive in their retirement planning, as early as possible.”
“Saving throughout your working lifetime is important to build your retirement account. However, as members approach retirement, they should explore investment vehicles that support the conversion of assets into stable income for retirement and generate sufficient growth to provide future payments, ideally mitigating against inflation.”
Roger Lau, Head of Retirement Business, Hong Kong, at Schroders, commented:
“Non-retirees can design their own retirement glidepath, with a focus on accumulating wealth and taking up more risk earlier on. Be more proactive in reviewing and managing retirement accounts, with a view of seeking more diverse income streams to better navigate returns cyclicality. They can consider broadening their investment horizons and exploring new asset types that would offer an enhanced risk and return profile ahead of retirement."
“For those looking for a convenient approach to retirement investing, don’t forget about the default investment strategy, which automatically reduces risk for MPF members approaching retirement age.”
Note to editors:
Schroders commissioned global market research firm Ipsos to conduct an independent online survey of 1,000 non-retired Hong Kong MPF scheme members from 27 February to 11 March 2024.
The firm has been operating in the Hong Kong market since 1971, and began providing retirement and surplus fund services in Hong Kong in 1974. As of 31 December 2023, Schroders has been managing US$30.7 billion in assets on behalf of Hong Kong retirement clients. It is the largest service provider in the ORSO defined contribution member choice scheme market in Hong Kong by AUM^.
^Source: WTW, 31 December 2022.
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