Year of the Horse Spells More Toil, Less Leisure, as Singaporeans Expect to Work into their 70s – Manulife Survey

• Singaporeans expect to work 3 years longer and retire 4 years later than their Asia peers

SINGAPORE, Jan. 27, 2014 /PRNewswire/ -- As Singaporeans usher in the Year of the Horse, the equine qualities of steadfastness, strength and staying power seem to be top of mind as they consider retirement; indeed if full retirement is ever an option.

Findings from the Manulife Investor Sentiment Index survey*, released today, show that Singaporean investors view retirement with almost unrealistic optimism. They see it as a time not just for leisure and being with the family, but also for doing a job to top up savings and to help keep mind and body healthy. They anticipate retiring early at the age of 61, before embarking on a longer period of post-retirement work that is lengthier than that of their peers elsewhere in the region.

However, this accepting attitude to work may ultimately not be optional – it may be a necessity – and it also requires good health and the availability of work itself, neither of which are foregone conclusions. The survey findings show investors making three retirement misjudgments concerning:

- The actual duration of their retirement

- Their day-to-day expenditure whilst retired

- Their ability to work during retirement

"Given the rising cost of living in Singapore and the fact that people here are living longer, the amount saved for retirement may seem fine now, but simply won't work in say 10 years' time," said Ms. Annette King, President and CEO of Manulife Singapore. "To delay or to not bother planning appropriately is a high-stakes option, and one that Singaporeans should avoid if they don't want to feel like workhorses in their golden years."  

Living Longer and Spending More  

The survey, covering the fourth quarter of 2013, shows that Singaporean investors planning for retirement expect to retire at 61 years of age and then continue working for a further nine years, well above the regional average of six years. They anticipate retirement, including the nine years of work, to last 19 years, suggesting a life expectancy of 80 years. In reality, the average Singaporean now lives to 84 years and, with that figure being an average, about half will live considerably longer.

The findings suggest that Singaporean investors won't have enough savings to see them through. They expect retirement expenditures to be 65 per cent of their current income but in reality, and taking into account recent trends in inflation, this figure will likely be much higher.  

"For example, one area of expense that may well increase is healthcare," said Ms. King. "Medical prices have risen in Asia at about twice the rate of inflation over the past 10 years. In fact, World Health Organization data[1] shows health spending per person in Singapore has risen nearly four times in the past decade. Healthcare is very expensive and you need more of it as you get older."

The rising costs mean that the majority (52 per cent) who said they probably or certainly will be able to afford a desirable retirement could struggle to do so.

The "Working Longer" Dilemma

Running counter to the risk-averse qualities that characterize many Singaporeans are their expectations of being able to work in retirement for an extended period. Nearly three-quarters (71 per cent) expect to work in retirement, in contrast to a much lower actual participation rate of about 40 per cent for 65-69 year olds, and less than 15 per cent for those 70-plus[2]. It's an approach that buys into the myth that the right type of work will be available come retirement. They also expect to derive more of their retirement income (17 per cent) from work than the regional average (13 per cent).

"Research reveals that elderly labor employment levels are generally well below the level the survey findings point to," explained Ms. King. "This may be because retirees are more selective about the jobs they take, looking for positions that offer flexible work schedules, or ones that are in line with their personal interests and that are less physically demanding. Or they may have elderly-related health issues that prevent them from working[3]."

Just as their life expectancy estimates and savings and retirement-work prospects can be viewed as a gamble, some Singaporeans look to be taking a high-risk route in their investment choices, albeit one built on caution. Singaporean investors hold on average 33 months of personal income in cash, well above the regional average (21 months). Of that cash, just one-fifth is set aside for day-to-day and unexpected expenses, leaving the remainder underutilized and losing value – as inflation can erode the value of one's savings.

Deployment of Wealth is Key

While the odds may appear stacked against Singaporean investors generating sufficient savings for retirement, they are well positioned in terms of wealth relative to current income. Effective deployment of that wealth is key.

"The survey shows that Singaporeans' accumulated savings are not working as hard as they could be, with respondents indicating that 39 per cent of their portfolios, excluding property, are allocated to cash. These savings generate little or no return – a portion would be better allocated to more productive investments such as fixed income or equity portfolios," said Ms. Jill Smith, Senior Managing Director and Chief Investment Officer with Manulife Asset Management (Singapore).

Investors here say they prefer cash because of its liquidity and stability, with favored investment alternatives being equities – in particular, blue chips – and real estate. Curiously, despite bonds offering stability, guaranteed returns and a much harder working investment than cash, Singaporean investors' interest in fixed income waned in the fourth quarter. 

"We see attractive investment opportunities among Singapore bonds, but feel that investors would benefit from diversifying their holdings in a regional portfolio to lower their exposure to market-specific risk factors," said Ms. Smith. "We are particularly positive on Asian corporate debt in the lower investment grade and strong non-investment grade categories. These securities are expected to deliver a recurring income stream and generally carry lower interest rate risk than higher-rated and sovereign bonds."

Singapore investors' lukewarm attitude to switching out of cash into other investments is reflected in the Manulife Investor Sentiment Index for Singapore, which was unchanged on the quarter at 13. This was below the regional average of 22.

For more findings and related information from the Manulife Investor Sentiment Index in Asia, please visit http://www.manulife-asia.com.

[1] World Health Organization National Health Account database, 2011

[2] Singapore Ministry of Manpower, Labour Force In Singapore, 2012

[3] International Labour Organization, Q313 Estimates (except Japan, which is 2012); National Statistics, Taiwan.