Economy affects retirement and rainy day plans in Singapore: OCBC

Source: OCBC. Average retirement ages by age cohorts.

Retirement planning and crisis plans have been pushed back in Singapore. With Singaporeans feeling the urgency to better manage their debt, 'planning for retirement’ was the indicator that saw the sharpest decline (40 compared to 47 in 2022), according to research from OCBC. The annual OCBC Financial Wellness Index which is in its 5th edition this year, surveyed 2,000 working adults in Singapore aged between 21 and 65 in August 2023.

Nearly eight in 10 (79%) Singaporeans either do not have a retirement plan or are not on track with their retirement plans – an increase from 71% in 2022, OCBC found. While it is not surprising that younger people in their 20s and 30s are further behind in retirement planning, one in three (34%) of those in their 50s and 60s are on track – a drop of 8 percentage points from 2022.

In addition, people are planning for their retirement later, even if they are older. Those in their 50s who have not started planning for their retirement stated that they intend to start preparing for retirement at age 60, which is 2 years later than the age this group quoted in 2022. Those in their 20s said they plan to start at 42 on average, 8 years later than their estimates in 2022.

At the same time, more are considering alternative retirement strategies. Nearly four in 10 (37%) of those who have not started on a retirement plan said they would work beyond retirement age, while 28% said they would retire overseas where the cost of living is lower. Nine percent said they would rely on their children to support them in their later years.

Singaporeans also fell behind on their ‘rainy day’ plans such as being able to defray major medical expenses or being able to meet their family’s financial needs for the next year. For example, only 42% of Singaporeans with dependents have accumulated enough funds to meet their family’s financial needs for at least the next one year – a drop from 50% in 2022.

More Singaporeans in their 50s (48%) and 60s (43%) with dependents had saved enough for this purpose. But these two groups also took a much bigger hit compared to younger Singaporeans, with a 14- and 24-percentage point drop respectively from 2022. This is most likely because they are sandwiched between tertiary institution-going children and ageing parents.

In contrast, this year, 31% (vs 41% in 2022) of those in their 20s and 46% (no change from 2022) of those in 30s with dependents had saved enough. Additionally, 84% of Singaporeans are putting aside at least 10% of their salary, a drop from 2022’s 91%. The average savings rate – the average percentage of monthly income saved – fell 5 percentage points, to 25% of one’s monthly income.

A larger proportion of Singaporeans also do not have at least 6 months’ salary as funds to overcome a crisis (53% this year compared to last year’s 46%).

Not surprisingly, fewer are investing this year, with only 79% of Singaporeans having investments versus 85% a year ago. The average rate of returns for Singaporean investors was slashed by half for another year running, to 0.4%.

Gen Zs and young Millennials had the highest proportion of investors who had losses – 40% of those in their 20s had negative investment returns. Taken in totality, the proportion of Gen Zs and young Millennials on track with their investment goals plummeted from 75% in 2019 to 32% this year. This could be attributed to a lack of rigorous research. One in five investors in their 20s (22%) seek investment-related advice and news only from social media channels and chat groups like TikTok and WhatsApp – the highest among all age groups, OCBC said.

"Many young investors in their 20s who lost money may not realise they have a blind spot either, with more than a third (35%) of them actively managing investments on their own, trading daily to profit from short-term price fluctuations," the bank stated.

At the same time, Gen Z and young Millennial investors were likely to have been impacted by international stocks investments, which have taken a pounding this year. Thirty percent of investors in their 20s invested in such stocks, the highest among all the age groups.

Non-traditional investments such as cryptocurrency and NFTs – once popular among young investors – have declined in popularity this year. In 2022, close to one in five (18%) of respondents in their 20s invested in cryptocurrency. Of these young crypto investors, two in five said that they would still be willing to invest in crypto within the next year, despite the volatility of the asset class in 2022. Yet just 6% of respondents in their 20s invested in cryptocurrency in 2023, likely due to adverse news including the collapse of a notable cryptocurrency exchange (FTX).

Qualified financial advice and the use of digital tools can uplift financial wellness, OCBC suggested. The Index found that getting proper help, whether in terms of advice or tools, had a positive impact on improving scores.

For instance, almost half (46%) of investors who seek qualified financial advice from financial institutions are on track with their investments. This is in contrast with those who do not seek advice from financial institutions, of these, only 35% are on track.

On average, investors who had sought qualified financial advice had a 3.3 times higher rate of return on overall investments compared to the national average. Those who did not seek advice, on average, reported a loss.

From the personality perspective, Singaporeans with ‘Emotional’ as their most dominant financial
personality trait have the lowest average Index score (54), performing especially poorly in areas such as having sufficient passive income, investing regularly and planning for one’s retirement.

Conversely, those with ‘Conscientious’ as their most dominant financial personality trait have the highest average Index score (64). While the average annual rate of return on investments for Singaporeans was 0.4%, this plunged to -0.8% for those who were dominant in the ‘Emotional’ trait but jumped to 1.4% for those who were ‘Conscientious’.

That said, the use of financial tools helped to uplift scores significantly for those with 'Emotional' as their dominant financial trait, OCBC shared. For example, the average score for a person who is dominant on the 'Emotional’ trait and who used a digital tool that provides an overview of their finances across the financial institutions they used, was 57. A similar person who did not use such a tool had the lower average Index score of 51.

OCBC’s Head of Group Wealth Management Tan Siew Lee said: “2023 has been yet another tough year, with the continuation of high interest rates, inflation and turmoil in the financial markets. All of these are reflected in this year’s results, with the Index at its lowest since we started in 2019.

"The silver lining is that Singaporeans are managing their debt better this year and are still saving well. These are virtues that Singaporeans must continue to practise, especially given the challenging outlook.

“Another simple step that Singaporeans can take is to understand themselves better. Our survey this year found that personality traits have a bearing on financial wellness. Taking the time to understand what traits they have, and the strengths and weaknesses associated with these traits, is therefore important. Only then can they find the right digital tools and solutions to bridge their shortcomings.”

FIRE movement popular in SEA

FIRE, which stands for "financial independence, retire early", is taking off in Southeast Asia. Milieu Insight's FIRE research* found that more than six in 10 respondents expect to retire in their 50s or 60s (62%).

Source: Milieu Insight. Different FIRE strategies across Southeast Asia.

Retiring early (defined as retiring before 50s) is a possibility for 60% of respondents, but only 14% think that they are on track for early retirement - Singaporeans seem most pessimistic about being able to do so, with only 9% indicating that they are on track.

The most common strategy towards early retirement is savings (71%), followed by ‘being careful with how I spend my money’ (63%) and ‘investing’ (63%). Finding additional employment is much less common (37%) as part of strategy to retire early, but tends to skew towards Thais (54%).

Insurance - one way of investing - is also more common among Singaporeans (56%) and Filipinos (53%). Most people are hands-on for retirement planning, with only 31% of those who plan to retire early saying that they have a financial consultant to help them.

Among those who save regularly for early retirement, 43% save more than 20% of their incomes. Among those who invest, 36% indicated that more than 20% of their incomes go towards investments. The most common investment types are:

- Investment funds (56%)

- Stocks (53%)

- Real estate (52%)

Cryptocurrency and non-fungible tokens (NFTs), which are currently crashing, register at 41%, and seem to be more popular in Thailand (57%) and the Philippines (54%).

*Based on Milieu Insight surveys with N=1500 employed respondents, aged 18-49 years old, each from Thailand, Singapore, Malaysia, Indonesia, and the Philippines, conducted in May 2022.

Henley & Partners appointed global concessionaire for Thai residency programme

From left: Sunchai Kooakachai, Deputy MD, Colliers International, Pruet Boobphakam, Thailand Elite's President, Dominic Volek, Henley & Partners, Managing Partner and Head, Southeast Asia, Kobkarn Wattanavrangkul, Minister of Tourism and Sports of Thailand, and Kylie Luo, BDO Tax Advisory Executive Director.

Henley & Partners, an international residence and citizenship advisory firm, has been appointed the global concessionaire to promote Thailand’s residence visa programme, Thailand Elite, which gives foreigners the right to live in the country for up to 20 years.

The Land of Smiles, as it is often referred to because of the friendly disposition of its citizens, has become one of the most sought-after destinations in Southeast Asia. An increasing number of wealthy families and retired individuals in Europe, the US, Japan and other developed nations are moving to Thailand because of its temperate climate, spectacular landscape and outstanding leisure facilities.

Thailand is also the best country to start a business, according to the 2017 Best Countries report*, which ranked 80 countries based on attributes such as affordability, bureaucracy, manufacturing costs, connectivity to the rest of the world and ease of access to capital.

Over the last four decades, Thailand has become an upper-income country. It has been widely cited as a development success story, with sustained strong growth and impressive poverty reduction. Besides being rich in agriculture, its industrial production facilities are global leaders in automobiles, electronics, healthcare and jewellery.

Initiated by the Royal Thai government, Thailand Elite is the first programme of its kind worldwide, to attract wealthy global citizens, families, investors and entrepreneurs who want to spend extended periods of time in the country and take advantage of its beneficial tax regime and affordable yet  high standard of living.

Wealthy individuals around the world are migrating or acquiring citizenship of other countries, in increasing numbers. The New World Wealth report* shows that global wealth is expected to rise by 35% over the next decade and approximately 82,000 high net worth individuals (HNWIs) migrated in 2016, compared to just 64,000 in 2015.  This trend is accelerating against a background of strong growth in global wealth and international mobility, says Henley & Partners.

Reasons why people migrate include a better quality of life, security, taxation, or skills acquisition.

Reasons behind migration vary. Apart from financial considerations such as better business opportunities and a favourable tax and regulatory environment, lifestyle factors such as warmer climate, higher quality of life, safer physical environment and better education for children are also high on the list of motivations**.  

Dominic Volek, Head of Southeast Asia at Henley & Partners, says: “The concept of global citizenship is gaining traction as a beneficial second or third residence or citizenship gives wealthy individuals more control, personal freedom, privacy and security, especially in today’s changing and uncertain world.  

“In response to these migration trends, governments are rolling out residence and citizenship programs as a way of driving economic growth, securing much-needed foreign investment as well as attracting people who have proven business success, talents and networks,” Volek explains.

To obtain the Thailand residence visa, foreigners must be a member of Thailand Elite, an exclusive programme offered by Thailand Privilege Card Company (TPC), a wholly-owned subsidiary of the Tourism Authority of Thailand. The programme provides a multiple entry visa and allows holders to stay in the country for an unlimited period of time subject to the validity of the programme option chosen.

The normal one-year stay extension can be made every year without the usual need to cross the border. The application process is very efficient — it takes less than one month to get visa issuance and collection at designated airports — and there are seven different programme options available to meet different family and individual needs.

Volek concludes: “International residence and citizenship planning has become an important focus for mobile entrepreneurs, wealthy individuals and their families who are interested in a more global lifestyle and broadening their opportunities. We are confident that we can help make a significant difference to Thailand’s economy by promoting this world-leading residence programme to those wanting to establish Thailand as their second home for part of the year or even move there permanently.”

Why Thailand and why now? One strong reason is a growing economy, with tourism arrivals of over 32 million last year accounting for 12% increase in tourism revenues, said Kobkarn Wattanavrangkul, Minister of Tourism and Sports of Thailand. "With tourism comes trading and investment," she said in an opening address.

"We offer a good life," she said, noting that Thailand is a medical and wellness hub, a sports hub, a food hub, a shopping hub, and international education hub, and is working on improving port facilities to bolster its positioning as a hub for marine activities.

"'Born to eat', that is the motto of people in Thailand. Nine of Asia's 50 Best restaurants are in Thailand," she said. "We are a global city with a local heart, and once we become friends, we become friends forever."

In a panel session Minister Wattanavrangkul further shared that some 150,000 non-Thais are living in Thailand on long-stay or working visas. "We see many enquiries and many comments from them about being able to stay (for longer)," she said. "This programme will help to support what Thailand would like to be."

"We're promoting Thailand as the regional office for many sports; there are runs and marathons every two weeks, and you can find major sports events in Thailand," she said. "We have Thanyapura Health and Sports Resort which has been authorised for Olympics athlete development programmes. It is fully booked for the next one or two years.

Sunchai Kooakachai, Deputy MD, Colliers International, said that there are two drivers to investment, infrastructure, and to capitalise on the 32 million-plus visitors a year. He added that properties in Thailand are typically 30% cheaper than equivalents in Singapore. "Bangkok and Phuket are still the main destinations, and then Chiang Mai," he said. "Pattaya also sees strong demand from foreign investors."

Kylie Luo, BDO Tax Advisory Executive Director, added that the top tax rate may be 35% but the tax regime is both straightforward and friendly. "What the person needs to look at is their home country tax status," she said. "(You are taxed) only when you receive income. If you don't bring it into Thailand in the year it is derived, in this case it would not be taxable in Thailand."

Pruet Boobphakam, Thailand Elite's President, said that most of the HNWIs in the programme are from the UK, US, China, France, Japan and Australia.

Wattanavrangkul lists the attractions of Thailand.

We have everything," summarised Wattanavrangkul, listing six-star hotels, jungles, and quiet places to relax as some of the different environments that Thailand offers."It is not just sightseeing. This is a place where you can retire with investment."

Interested?

The following are the most popular options:  

 Elite Ultimate Privilege — 20-year residence visa with complimentary VIP services for applicants over the age of 20 years, who pay a one-off fee of approximately US$60,000, plus an annual fee of approximately US$600

 Elite Privilege Access — designed for family applications and provides a 10-year residence visa, with complimentary VIP services. The one-off fee is approximately US$30,000 for the main applicant and approximately US$22,500 for each dependent with no annual fee or age restriction

 Elite Easy Access — a popular option with a five-year residence visa for expats or business people wishing to enter and exit Thailand regularly. The one-off fee for this package is approximately US$15,000, with no annual fee or age restriction

*The 2017 Global Wealth Review (GWR): Worldwide Wealth and Wealth Migration Trends   

**The Rise of the Global Citizen? – Barclay’s Wealth Insights 

***The 2017 Best Countries report by US News & World Report, Y&R’s BAV Consulting and the Wharton School of the University of Pennsylvania 

posted from Bloggeroid

Manulife: Asians may need to retire later than they think

Asian investors are overly optimistic about their retirement years, assuming they can continue working beyond the official retirement age while maintaining expenditure at around two-thirds of their current salaries, according to the latest Manulife Investor Sentiment Index survey*. 

According to Manulife, investors are misjudging their ability to work after they retire, the actual duration of their retirement, as well as day-to-day expenditure during retirement. Life expectancy data** shows that the survey respondents are likely to live up to five years longer than they anticipate, leading to the likelihood that retirement savings will run dry during their lifetime. 

"Sadly, many are eyeing the wrong target and realise the mistake late in the day, so they end up delaying or trying to delay retirement," said Robert A. Cook, President and CEO of Manulife Financial in Asia. "We see in the survey those in their twenties expecting to retire at 58 and that creeps up to 65 by the time they're in their sixties. As they grow older, they realise they'll live longer. 

"A large number of our survey respondents - even those who have been actively investing for retirement - also say they wish they'd started planning earlier or saved more from the outset."

Saving for retirement stood out as a top priority for investors in all the markets covered in the survey, apart from in Malaysia, with nearly two-thirds believing they certainly or probably will be able to afford a desirable retirement. But, based on investors' own estimates, a gap exists between savings and retirement expenditure amounting to about six years.* 

Survey respondents said they expect retirement expenses to average 64% of their current income, but in reality they will likely be much higher. This has not yet hit home with Asia investors for whom retirement is seen as a time when they are free to do what they want (48%), enjoy what they have earned in earlier years (41%), and spend more time with family and friends (40%). 

Attitudes towards retirement are predominantly positive, with old age and poor health only a top-three consideration for investors in Indonesia (40%) and Hong Kong (34%).

Said Michael Dommermuth, President, International Asset Management at Manulife Asset Management: "I think we're all aware of it from personal experience with family or friends, but the reality is that medical prices have risen in Asia at about twice the rate of inflation over the past 10 years. In fact, World Health Organization data*** shows health spending per person in China has risen nearly six-fold in the last ten years. In Singapore, it's nearly four times higher and in Indonesia it's over five times higher. Healthcare is very expensive and you need more of it as you get older."

The Manulife survey also shows more than half (54%) of investors expect to work full- or part-time after their official retirement, for another six years, on average, until the age of 66. Singaporean investors expect to continue working the longest, with another nine years of 'post-retirement' work until age 70. Very few say they have no choice but to work, but in reality they may not be able to work whether they want to or not.
 
"Research reveals that elderly labour employment levels are generally well below the level the survey findings point to," explained Dommermuth. "In North Asia, elderly labour participation ranges from 8% in Hong Kong and Taiwan to 20% in Japan****. 

"This could be because although retirees want to work, they may be increasingly selective about the jobs they take, waiting to find a position that is line with their personal interests, offers a flexible schedule and is less physically demanding. Or their ability to work may be limited due to elderly-related health issues."
According to Manulife, the 65-plus age group has been shrinking as part of the workforce in Asia's developed economies. In Hong Kong, for example, it has dropped to about 40% of what it was 30 years ago.

Careful planning will help investors to deal with the future, says Manulife. "When compared to their North American counterparts, Asian investors tend to be better off in terms of wealth relative to current income," said Donna Cotter, Head of Asia Wealth Management. "But they don't deploy their wealth as well as the Americans -- an example being Asians' habit of hoarding excessive amounts of cash, which loses value, instead of investing it. With attention and planning, Asian investors can improve their retirement outlook in a relatively painless way."




*Manulife's Investor Sentiment Index (ISI) has been measuring investor sentiment in Canada for the past 14 years, and extended this to its John Hancock operation in the US in 2011.  

In Asia it is a quarterly, proprietary survey tracking investors' views across eight markets in the region on their attitudes towards key asset classes and related issues. The Manulife ISI is based on 500 online interviews in Hong Kong, mainland China, Taiwan, Japan, and Singapore, and face-to-face interviews in Malaysia, Indonesia and the Philippines.  

Respondents are middle class-to-affluent investors aged 25 years and above who are the primary decision maker of financial matters in the household and currently have investment products. The Manulife ISI Asset classes taken into Manulife ISI Asia calculations are stocks/equities, real estate (primary residence and other investment properties), mutual funds/unit trusts, fixed income investment and cash.

**Manulife Asset Management; UN Population Division; National Statistics, Taiwan.  
  
***World Health Organization National Health Account database, 2011

****International Labour Organization, Q3 2013 Estimates (except Japan, which is 2012); National Statistics, Taiwan