| On retirement planning |
Singaporeans are ahead of others when it comes to taking personal responsibility for retirement planning. About 90 per cent of working and 85 per cent of retired respondents from the city-state said so in the AXA Retirement Scope 2008 annual global survey conducted by AXA Life Insurance. Launched in 2004, the study covers people’s perception and attitudes towards retirement from 26 countries. Responses came from 18,202 working and retired people via telephone interviews. Singapore became part of the first, third and fourth wave of the study. Compared to the United Kingdom and Hong Kong, Singapore ranked high in the survey’s category, which measures people’s perception about taking responsibility with planning their retirement. Apart from the top three events triggering retirement for many Singaporeans -- having children, reaching 40 years of age, and reaching 50 years of age – the survey reported a heavy dependence of people in the city state on their Central Provident Fund (CPF). Not surprisingly, only 54 per cent of Singaporeans have started some form of retirement planning while the rest wait until they reach 46 years of age. The CPF remained the main source of fund for the retirement years. About 75 per cent of Singaporeans save by leaving their CPF funds to accumulate interest. Ms Annette King, chief marketing and strategy officer of AXA Life Insurance Singapore, “The heavy reliance on CPF savings for retirement is worrying because these savings will only provide a quarter of the funds needed for the average Singaporean.” She added, that 77 per cent of working Singaporeans use their CPFs to pay for their property mortgages and it is crucial to examine what remains of their CPF savings by the time they retire.  “While they may have a roof over their heads, they may not have sufficient funds for their daily expenses or for enjoying the things they want in their later years,” Ms King said. Besides their CPF contributions, many Singaporeans get their retirement allocation through personal savings and life insurance plans, which has become popular especially for the working class. The report further said that on average, retirees in Singapore had only $100 disposable income after paying off all household expenses and are slightly better off than the Asian markets (except Thailand) surveyed but pales in comparison with the European markets (except France). Despite the lack of funds, Singaporeans believed they should take personal responsibility for their retirement income. This was especially true for retirees without children/grand-children and with high income. Many thought that the government and employers should also be responsible for providing their income. And although many anticipate lower income, they thought it will be sufficient. Majority of Singaporeans preferred to play it safe when investing in financial products for retirement. About two in three Singaporeans wanted a minimum return without any financial risk, and only 23 per cent of working Singaporeans and 13 per cent of retirees were willing to accept a higher return with a higher financial risk. The majority of retirees were right to assume this point of view because as retirees, they could not afford to sustain any market shocks. The rule of the thumb is: the longer the investment horizon, the more aggressive can the investment portfolio be. More retirees than working Singaporean were in favour of raising the minimum retirement age. The reported indicated that working group would like to retire earlier (at 55 years old) but realistically expect to be able to retire only later (at 58 years old). On the contrary, the retired group retired earlier (at 55 years old) than their perceived ideal age (59 years old). And even after retirement, people here are still holding on or planning to hold paying jobs. Many working Singapore were also delaying their retirement. More than half of them had already begun preparing for retirement, is the majority being those aged 35-44 years of age with higher income. The working group started preparation at an earlier age (34) than the retired group (41). In contrast, more people in the US, Canada, HK, Australia and the European markets (except France) started retirement planning at a much younger age. Singaporeans were optimistic towards their retirement. In fact 22 per cent of those who were working felt that retirement would bring about improved living standards. two out of three Singaporeans viewed retirement as freedom and a time to pursue their interest, such as travelling. While only two in ten Singaporeans associated negative thoughts with retirement, and these concerns relate to death, health problems, financial dependency, and being in financial difficulties. Compared with the survey average, Singaporeans also saw their retirement life to be better than that of their parents, while only few foresaw a positive one for their children’s life than their own. Men and women also perceived to face retirement issues differently. While men would tend to suffer from boredom, loneliness and health-related problems, women on the other hand would be able to socialize and enjoy life. And overall, financial situations would be less favorable for women. ConclusionAs Singaporeans are not sufficiently prepared to retire, there is a need to start saving early, start saving more, and to employ excess cash in investment schemes so as to reap a better rate of return. There is also a misconception that CPF is sufficient for retirement funding. This must be addressed as it will snowball and before you know it, more than two in ten will associate negative thoughts with retirement. The majority of Singaporeans expect to work through retirement. While this may not be exactly bad, one needs to determine if they are seeking work to keep them engaged or for financial reasons.
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