New Retirement Preparedness Indicator highlights financial and
economic factors influencing retirement readiness in Asia
TORONTO, Nov. 14, 2012 /PRNewswire/ -- Manulife Asset
Management has issued a report that introduces its Retirement
Preparedness Indicator, which highlights the financial and economic
conditions influencing the ability of individual economies to
provision for their aging populations. The report covers 11 Asian
countries and territories and finds that many face significant
challenges to retirement financing at both the state and the
individual levels.
The report, entitled Funding the golden years: The
financial and economic factors shaping retirement provision
for Asia's rapidly aging
populations, is part of Manulife Asset Management's Aging Asia
research series and builds on the findings of its June 2012 publication: Saving up: The changing
shape of retirement funding in a greying ASEAN. The
previous publication revealed how ASEAN countries once considered
to be among the most 'youthful' in Asia are actually aging more rapidly than most
realise. For a copy of the report, please contact
bcarmichael@manulifeam.com.
The new report divides the subject countries and territories
into three broad categories of retirement preparedness. Those
deemed to be facing the 'most favourable conditions' are
Taiwan, Hong Kong and Japan, which are typified by high levels of
financial wealth, high state pension coverage and well-developed
financial markets. However, they also face some of the most dire
demographic profiles and slowing economic growth prospects. Those
judged to have 'favourable conditions' are Singapore, China, Malaysia and Thailand. With the exception of Singapore, these countries tend to have lower
levels of financial wealth and state pension coverage but have high
savings rates, robust economic growth potential and relatively
positive demographic profiles. Those deemed to be facing
'challenging conditions' are Indonesia, South
Korea, Vietnam and
the Philippines. Except for
South Korea, these countries
generally have very low levels of government pension coverage, the
lowest levels of financial wealth and shallow financial markets. On
the other hand, they are likely to see income and savings rates
rise and enjoy relatively favourable demographic profiles. What
differentiates South Korea from
this group is that it faces the twin challenges of a rapidly
growing elderly population and rapidly declining elder support
ratio. However, its relatively high financial wealth and high
savings rate work in its favour.
The report reveals that it is ultimately the interplay between
demographic, financial and economic factors that will determine
whether or not Asian countries and territories will become rich
enough to sufficiently fund retirements before they become too
old.
Oscar Gonzalez, economist at
Manulife Asset Management, pointed out that: "While countries
facing 'favourable conditions' and 'challenging conditions' tend to
have lower levels of accumulated wealth, factors such as relatively
positive economic outlooks and high savings rates work in their
favour. For example, China is
expected to see per capita real GDP growth of 6% per annum between
2011 and 2050. Despite its demographic challenges, this robust
growth, combined with a historical savings rate of 47%, implies
that individuals in China are
still well positioned to contribute to financing their own
retirements if appropriate savings vehicles and incentives are
available."
Gonzalez added "In many of the countries facing 'challenging
conditions', the positive impact of robust GDP growth and high
savings trends will be amplified by relatively attractive
demographic profiles. Working age populations in Indonesia, the
Philippines and Vietnam are
expected to continue to account for about 60% of the total
populations through 2050. This means that retirement preparedness
in these economies will likely be enhanced by the addition of
significant numbers of new savers over the coming decades."
Michael Dommermuth, president of
Manulife Asset Management Asia, commented on the report's
conclusions: "Asia as a whole is
aging much more rapidly than most realise and individual countries
and territories face varying conditions that affect their abilities
to provide for their growing retired populations. With mandatory
pension plan coverage below 50% in the majority of the economies we
studied, this report reveals that most public retirement schemes in
the region will need to be supplemented. The ability to do so
hinges on the availability of secure savings vehicles that unlock
the potential to grow personal savings. In a region with
historically high savings rates, this is strongly influenced by
government policy support for enhancing financial market depth and
the level of private sector interest in alternative savings
mechanisms such as mutual funds and investment-linked insurance
products."
The report points out that Asia
is likely to experience an increased shift in responsibility for
retirement funding from the state to the individual. As this shift
takes place, Dommermuth anticipates a growing need for investment
products such as asset allocation funds that help build pension
pots and, ultimately, income generating products that generate
steady cash flow in retirement.
Manulife Asset Management has considerable experience building
multi-asset solutions designed to meet specific client objectives
and constraints. Its dedicated asset management unit, the Portfolio
Solutions Group, has investment professionals across the U.S.,
Canada and Asia managing more than US$90 billion in asset allocation funds, making
Manulife Asset Management one of the world's leading asset
management firms.
Dommermuth concluded: "Based on market knowledge gleaned from
our footprint across 10 countries and territories in Asia, we know how to provide customised
investment solutions that meet local market needs. This is why,
when it comes to retirement solutions, Manulife has launched mutual
funds and participates in the pension business in Hong Kong, issued fixed annuity insurance
products in Japan and launched
investment-linked plans that provide a regular income stream in
Singapore, for example. We are
also proud to have been selected as a provider for Malaysia's Private Retirement Scheme, which is
one example of pension provision reform that has already been put
in place."
Notes to editors:
1) How is the Manulife Asset Management Retirement
Preparedness Indicator calculated?
The Manulife Asset Management Retirement Preparedness Indicator
is composed of financial and macroeconomic components that together
describe the environment facing pensioners within 11 countries and
territories in Asia.
The financial component (70% of the overall indicator) looks at
vital factors such as a country or territory's financial wealth,
coverage ratio, average income, sovereign bond default rate and net
pension wealth. It seeks to quantify the conditions that affect
both a state's ability to provide for its prospective pensioners
and an individual's ability to bear some of the responsibility for
their own pension provision.
The macroeconomic component (30% of the overall indicator)
quantifies the 'bigger picture' factors which will weigh on both
states and individuals in the years to come, but which are largely
beyond the influence of private citizens. These include support
ratios (i.e., the proportion of working age people relative to
retirees), gross national savings and forecasted GDP per capita
growth rates.
2) Net pension wealth is defined as the size of
the lump sum that would be needed to buy the flow of pension
payments, net of personal taxes and social security contributions,
promised by the pension system in an economy. (Source: OECD
Asia/Pacific 2011)
3) What percentage of the populations of the 11 countries and
territories analysed are covered by government-mandated pension
plans?
|
Coverage ratio
|
Japan
|
75%
|
Taiwan
|
70%
|
Hong
Kong
|
56%
|
Singapore
|
45%
|
Korea
|
40%
|
Malaysia
|
33%
|
Thailand
|
21%
|
China
|
17%
|
Philippines
|
14%
|
Indonesia
|
11%
|
Vietnam
|
11%
|
Note: Coverage ratio = percentage of population covered by
mandatory plan
Source: OECD Pensions at a Glance, Asia/Pacific Edition 2011
(Taiwan data is from 2009
report)
4) What are the historical gross national savings rates of
the 11 countries and territories analysed?
|
Gross
national savings*
|
China
|
47%
|
Singapore
|
42%
|
Malaysia
|
35%
|
Vietnam
|
32%
|
Korea
|
32%
|
Hong
Kong
|
31%
|
Taiwan
|
29%
|
Thailand
|
29%
|
Indonesia
|
28%
|
Japan
|
25%
|
Philippines
|
22%
|
Note: * Average 2000-2011 gross national savings as a % of
GDP
Source: National Statistics Offices & Global Insight
About Manulife Asset Management
Manulife Asset Management is the global asset management arm of
Manulife Financial. Manulife Asset Management provides
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investors and investment funds in key markets around the world.
Manulife Asset Management also provides investment management
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investment expertise extends across a broad range of asset classes
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Kingdom, Japan,
Hong Kong, Singapore, Taiwan, Indonesia, Thailand, Vietnam, Malaysia and the
Philippines. In addition, it has a joint venture asset
management business in China,
Manulife TEDA. It also has operations in Australia, New
Zealand, Brazil and
Uruguay. John Hancock Asset
Management, Hancock Natural Resource Group and Declaration
Management and Research are units of Manulife Asset Management.
Manulife Asset Management was named Best Asian Bond House
for 2011 by Asia Asset Management. As at 30
September 2012, assets under management were US$228 billion. Additional information about
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Manulife Financial is a leading Canada-based financial services group with
principal operations in Asia,
Canada and the United States. In 2012, we celebrate 125
years of providing clients strong, reliable, trustworthy and
forward-thinking solutions for their most significant financial
decisions. Our international network of employees, agents and
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provide asset management services to institutional customers. Funds
under management by Manulife Financial and its subsidiaries were
C$515 billion (US$523 billion) as at 30
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in Canada and Asia and primarily as John Hancock in the
United States.
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SOURCE Manulife Asset Management