The majority of Hongkongers and Singaporeans aged between 45 and 64 years are unprepared for retirement and rising inflation, a new study finds.

About 64% of them are concerned about becoming a financial burden on their families, while an equal proportion don’t understand how to manage intergenerational wealth transfer effectively, which is a source of stress for 57%.

The study, launched by St. James’s Place Asia ( SJP ), comes at a time when Singapore’s retirement age has been raised from 62 to 63 as of July 2022, with plans to gradually raise it to 65 by 2030. Hong Kong’s official retirement age is 65. With an average life expectancy of 83.5 and 85.2 years in Singapore and Hong Kong respectively, the elderly in the two cities are likely to spend at least 20 years in retirement.

According to the study, 66% of respondents say the fallout of Covid-19 has made them more concerned about planning for their retirement. As a result, over two thirds ( 67% ) are worried about their ability to cover healthcare costs in their retirement with 64% expressing concerns about being a financial burden to their families.

This inaction may be due to a lack of awareness, with 59% saying they do not fully understand the financial products and services available to help them plan for retirement, as well as managing immediate financial issues spurred by the pandemic – with close to half ( 46% ) needing to draw down from or reduce retirement contributions since the start of the pandemic.

Owing to this uncertainty, 72% of those surveyed in Singapore and Hong Kong are making lifestyle sacrifices now in the hope they can enjoy a better retirement. In retirement, most anticipate they will need to make further spending cuts, including reducing expenditure on luxury goods ( 46% ), social life ( 35% ), and travel ( 33% ).

Source: St. James’s Place Asia

'“It is concerning that high levels of unpreparedness around retirement planning still persist, especially in the face of increasing economic volatility and skyrocketing inflation,” observes SJP Hong Kong chief executive officer Oliver Wickham. “With people spending longer periods in retirement in the future, having a sound financial plan should be priority as it can go a long way towards easing some of the associated stress and anxiety while achieving a more comfortable retirement.”

The study further finds a high level of uncertainty around wealth transfer, with 64% of respondents saying they lack understanding about how to manage intergenerational wealth transfer effectively, and 65% do not understand the tax implications they may face.

As a result, 57% say wealth transfer and succession planning is a source of stress in their life, and 50% say that it is causing disharmony among their family members.

A low level of action is also seen, with 60% saying they do not have a will, while 83% have life insurance. Close to half ( 46% ) have not made any plans to transfer their wealth or assets to family members, but 44% of these people say they plan to do this within the next five to 10 years.

A strong trend is also seen in donating wealth to philanthropic causes, with 42% planning to do this. While 84% say their family members are aware of these wishes, having a will in place can ensure that the distribution of assets is managed according to the person’s wishes while minimizing the possibility of disputes arising amongst family members.

Source: St. James’s Place Asia

Gary Harvey, CEO of SJP Singapore, says: “Wealth transfer and succession planning unfortunately comes with many potential planning and emotional pitfalls that one must be carefully prepared for. While having wealth transfer conversations with loved ones can be challenging, it is an important first step towards ensuring peace of mind and avoiding major issues. The high number of Singaporeans over 45 who still do not have a will is deeply concerning and may be due to people wanting to avoid tough conversations or delaying thinking about the inevitable. Seeking professional, third-party financial advice can help alleviate this stress and provide clarity and assurance to all involved that their commitments and wishes can and will be met."

Despite the uncertainties and lack of preparedness in retirement and wealth planning, most Singaporeans and Hongkongers approaching retirement welcome professional financial advice, with 76% saying they have sought this out before making major financial decisions.

Investments ( 85% ), followed by retirement planning ( 73% ) and insurance ( 72% ), are the areas indicated of highest need for receiving better professional financial advice.

While 90% say the professional financial advice they have received is useful, currently only 53% engage a financial adviser to help manage their investments. The main reasons cited for not doing this is a belief that they can sufficiently manage their own investments ( 36% ), concern about fees ( 26% ) or lack of trust in a third party ( 16% ). However, 55% also believe they could have achieved larger returns on their investments in the past one to five years if they had engaged a financial adviser.

Top sources of financial advice for Singaporeans and Hongkongers over 45 years of age are now independent advisers and banking relationship managers, surpassing family as the leading source of advice for almost every investment type, the study finds. Receiving advice face-to-face is critically important to 76% of this age group. For long-term planning, most would prefer to visit a financial adviser ( 42% ) or their bank ( 38% ) over engaging with a robo-advisory platform at just 20%.