Post-retirement solutions

While individuals, asset managers and governments across the developed world have long focused on retirement planning – i.e. saving and investing for the golden years – surprisingly little attention has been paid to decumulation planning.

As life expectancy lengthens and expected retirement spans extend, the importance of planning how to deploy accrued savings to support retirement has never been more acute.

How to invest while in retirement

How should retirees in Hong Kong invest during retirement given lengthening life expectancies and the increasing risk of higher inflation?

In January 2018, Schroders undertook a study of Hong Kong residents’ views of investment, savings and spending as they look towards retirement. The Hong Kong Retirement Research is based on interviews with 700 people, from those who were eight years before their retirement to those retired.

In the video below, Lesley-Ann Morgan, our Global Head of Defined Contribution and Retirement, shares some of the valuable insights from this latest research and highlights three key lessons to help with those who are starting to think about retirement and also those who have recently retired.

Schroders believes addressing the post-retirement challenge requires a two-pronged approach:

  • On the one hand, governments, employers and asset managers must continue to support individuals during the asset accumulation phase of their lives to ensure they have sufficient savings at retirement.
  • On the other, there is a need for increased focus on the too-often-ignored decumulation phase of life, when retirement savings are being drawn down.

Crafting a decumulation strategy that works

In our study of decumulation strategies worldwide, including in Hong Kong, we found that every individual faces a balancing act between addressing the features they need and those that they want.

In searching for this balance, Schroders works with employers and sponsors to consider the tools plan participants have at their disposal, which comprise three key options:

  1. cash lump sum is the simplest option. It allows individuals to control their own funds, but also leaves them with all of the responsibility and risk associated with managing decumulation.
  2. Utilising individual accounts allows an individual to adjust income levels throughout the decumulation process. At the same time it offers the flexibility to choose underlying investments while also having the option to access the benefits of a lump sum and an annuity.
  3. Annuities provide a reliable income stream while an insurer manages the associated pooled risk. The income stream can be set at a flat level or rise over time and, similarly, can start immediately or in the future. Annuities can also deliver the peace of mind of including guaranteed spousal benefits.

Creating a tailored decumulation strategy

There is no single option that produces a suitable solution for everyone. Rather, any given post-retirement decumulation strategy is likely to utilise a combination of these options in order to meet the key needs of individual retirees in Hong Kong. Schroders believes there are four key areas where such a solution must deliver:

Default to a tailored decumulation plan

With so much uncertainty surrounding post-retirement planning and myriad options available, an ongoing debate in the asset management industry surrounds the potential for governments and employers to offer a “default decumulation strategy”.

While the simplicity of this approach is appealing, Schroders believes planning a decumulation strategy for any one individual is simply too complex for such a prescriptive approach to work as:

  • Everyone’s circumstances differ meaning a default strategy may not match a given individual’s needs.
  • Improved financial literacy and the availability of web-based resources empower individuals to make their own accumulation and decumulation choices.
  • Many individuals highly value choice.
  • It would be impossible to get all stakeholders across government, plan sponsors and asset managers to agree on one default plan.

In fact, our research and discussions with stakeholders suggests that an individually tailored post retirement plan is the only plan that should be considered “default”.

This does not mean leaving plan participants at sea amid a hundreds of potential decumulation plans. Rather, Schroders suggests providing retirement plan participants with a short-list of appropriate plans that have the potential to deliver longevity protection despite continued inflation and the potential for capital market volatility.

To explore the key considerations for decumulation planning further, please download our reports using the buttons below.


Our business is structured around a number of strategic capabilities, which combine to meet a variety of client requirements. Please visit the Strategic Capabilities - Retirement page to discover how we help our clients improve their retirement journey.

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