The Schroders Global Investor Study 2017, which surveyed over 22,000 investors across 30 markets, including more than 500 respondents in Hong Kong, has found that investors are not financially prepared for retirement.
In Hong Kong, almost all (95%) retired investors regret they had not saved more money for retirement, which is much more than their global (66%) and Asian (89%) peers who also thought the same.
For non-retired investors, 61% of them fear their retirement income will not be sufficient to provide a comfortable life, compared to 34% and 37% of global and Asian investors, respectively.
In addition, Hong Kong investors who are yet to retire are currently saving 10.8% of their annual income when they feel they should be saving an average of 16.6% in order to not worry about meeting their needs.
The under-saving phenomenon is very significant amongst Hong Kong investors, which raises the question, how will they fill this savings gap?
One way in which investors could save more is to work for longer, and investors appear to be cognisant of this.
Retired investors said they had wanted to fully retire at an average age of 55.6 years old, but their actual average retirement age was nearly five years later, at 60.1 years.
Learning from the elderly, non-retired investors are relatively more realistic than their retired counterparts. They expect to retire slightly older at 60.6 years, while they would like to retire at 58.9 years old.
Kelvin Lee, Head of Institutional Business, Hong Kong said: “The high percentage of retired investors who wish they had saved more for retirement, and non-retired investors who report their current savings level may not be adequate, indicates that the challenge to fund a comfortable retirement is an issue that everyone faces.“
How are investors saving for retirement?
The Schroders survey found that the main source of retirement income for Hong Kong investors are savings and investments (30.9%), followed by company pension (18.3%) and personal pension (15.4%).
Other sources of post-retirement capital include income from property (i.e. rental income) (8.1%), money from spouse or relatives (7.8%), part-time job (5.5%), inheritance (4.1%) and releasing capital/equity from their homes (2.7%).
One trend that the survey found amongst those who are yet to retire, was that 61% are hoping to work part-time for an average of 3.8 years before fully retiring. Also, 39% want to turn their hobby into a source of income when they do retire.
Kelvin Lee continued: “The most powerful resource available to savers is time. We urge investors to plan ahead and action early for their retirement fund. Starting saving at an early age makes an incredible difference to the eventual size of one’s retirement pot. The power of compounding, where returns are earned on returns, adds up over 30 or 40 years of saving.”
“Our analysis shows that someone who started their retirement savings at age 30 would need to save around 15% of their annual income each year if they wanted to retire on 50% of their salary at 60. We recommend investors of all ages to seek advice from professional financial advisers to understand their own retirement needs, and what they can do now to achieve their retirement targets."
The views and opinions contained herein are those of Schroders’ investment teams and/or Economics Group, and do not necessarily represent Schroder Investment Management North America Inc.’s house views. These views are subject to change. This information is intended to be for information purposes only and it is not intended as promotional material in any respect.