In focus

Schroders insights for building better post-retirement solutions


Today’s retirees face more risk and uncertainty than ever. Not only is there a plethora of tricky decisions to make, the modern day retiree has no choice but to accept responsibility to regularly review how realistic their expectations are. There is no ‘typical’ retiree. Some may have multiple retirement savings accounts, guaranteed forms of income or other sources of wealth. And a growing number are likely to phase their retirement – driven either by financial need or a desire to continue working. One-size-fits-all solutions are likely to result in one-sizefails-most outcomes.

Why is post-retirement investing so difficult? What do people actually need in retirement? Is there one right answer?

The short answer is no. There are many complex issues involved in post-retirement solutions: insufficient savings, low bond rates, lack of financial knowledge, opaque products, regulations, operational constraints, political pressures and the role of the state as a safety net, to highlight a few. These challenges are well known. And the number of people involved is vast and growing due to improving longevity: the percentage of the Hong Kong population aged 60 and above is expected to rise from 25% in 2019 to 42% in 2050. These figures are higher than the whole of East Asia and Pacific, where the figures are 16% in 2019 rising to 31% in 20501.

Faced with uncertainty, and the availability of many choices, in the absence of good quality advice or guidance, retirees are likely to make sub-optimal decisions. That's why it is vital for governments, policymakers, financial institutions and advisers to work together more, to simplify this complex world. By doing so, we can build better retiree-centric products and solutions that not only help to mitigate their risks in retirement, but are also easy to access and simple to understand.

Figure 1: Expected increase in retired population

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What do we mean by ‘retirement’

Retirement used to be relatively straightforward. Individuals would work full time up to their retirement date and would then cease work entirely – the so called ‘cliff-edge’ retirement. It was also common to have fewer separate sources of retirement income and for a portion of this to come from a guaranteed source (for example state and/or defined benefit pension).

In the modern world, retirement can be a much more complex and flexible concept. Due to increasing health and longevity many people are opting to continue working part-time even after officially retiring. Alternatively, some people are taking a relatively short period off work (for example to travel) and then returning to continue some form of work. In other words, the ‘cliff-edge’ retirement will not apply to many people.

In addition, the majority of individuals who are close to or in retirement will have a number of sources of income and wealth that can be combined to meet their lifestyle needs. These include:

  • Guaranteed income (for example: state pension, defined benefit pensions, life annuities)
  • Other income (for example: part time work, inheritance)
  • Savings and investments (for example: defined contribution pensions, general savings and investment accounts, rental property)
  • Other sources of wealth. These are assets that form part of the individual’s wealth, but would only be sold to provide funds in an extreme circumstance (for example: residential property).

Given that the nature of retirement will be different for each individual, it is vital to understand all the different risks an individual faces in retirement and take these into account along with the individual’s circumstances when designing a post-retirement solution.


1 World Bank, https://data.worldbank.org/region/east-asia-and-pacific.

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