- Retirement age increases needed to mitigate impact of aging populations
- Greatest public support in Indonesia, Malaysia and Philippines; opposition in China
- Official retirement ages rising in Asia, but some left behind amid region-wide growth
HONG KONG, May 22, 2014 /PRNewswire/ — Official retirement ages across Asia are out-of-date and need to be raised say the majority of Asian investors, according to new research from Manulife.
The findings, taken from the Manulife Investor Sentiment Index* survey for the first quarter of 2014, show that just over half the Asian investors surveyed region-wide said they agreed with raising the retirement age, with a quarter disagreeing and the remainder undecided. Investors in Indonesia, Malaysia and Philippines were most in favor of such a move, with two-thirds or more saying yes. About half of those in Hong Kong also agreed. Only in mainland China was there a clear majority (64 per cent) who disagreed with an increase.
Asians already recognize there’s a need to work beyond the normal retirement age in their respective locations, both to make ends meet and to enjoy a higher quality of life that comes with being actively engaged in the workplace and community. The survey shows 60 per cent of Asians expect to work either full- or part-time in retirement, with around 80 per cent viewing it as a way to stay connected and healthy, as well as a source of income. Those surveyed expect to work an average six years beyond the official retirement age of their country.
“The survey suggests Asian investors feel strongly that retirement ages have become outdated and should be raised,” said Robert A. Cook, President and CEO, Manulife Asia. “We’ve just seen the same sentiment in the Australian government’s decision to lift their official retirement age to 70 [from 65]. That’s a bold move, likely to be looked at closely by other governments in this region.”
China an outlier opposed to raising the retirement age
Official retirement ages in Asia range between 55 and 65 years of age, yet the majority work beyond those ages — with the exception of China, which again is the outlier. China is the only market in the region where the actual retirement age is below the official one. The Chinese surveyed said they expect to retire at 58 years of age, do post-retirement work for another 5 years before actually retiring at 63 — two years below China’s official retirement age.
Only in Japan do respondents say they will work for fewer years post-retirement (for 4 years up to age 66), while in Singapore respondents expect to work for longer than anywhere else (for 9 years up to age 70).
“A retirement age that was suitable in Asia 20 or 30 years ago is now likely to be obsolete. People can see that. They know too that they will need to work on after retiring, so they see merit in raising the retirement age to formalize the process,” said Mr. Cook.
In Indonesia, where there was the most enthusiasm (73 per cent of those surveyed) for such an upward adjustment, the official retirement age is 55. Indeed, the gap between the official and expected retirement age (67 years, including seven years post retirement work) is higher in Indonesia, at 12 years, than anywhere else in the region.
“Back in 1980, the somber reality was that an Indonesian retiring at 55 lived on average only a few years beyond their working life(Note 1),” said Donna Cotter, Head of Wealth Management for Manulife Financial in Asia. “But thanks to economic growth and development on an unprecedented scale, life expectancy has stretched to 71 years(Note 2). This also means one’s accumulated wealth needs to last much longer.”
Raising retirement ages not unprecedented
Raising the retirement age is far from unprecedented in Asia. In Singapore, the mandatory retirement age was raised to 62 from 60 in 1999, and employers now have to offer re-employment to 65. Taiwan lifted its retirement age to 65 from 60 in 2008. Most recently, in 2013, Malaysia raised its retirement age to 60 from 55.
“What may have seemed like a bold move by the Malaysian government is actually very forward-looking, anticipating the needs of its people,” Ms. Cotter continued. The survey shows 70 per cent support from Malaysia investors for increasing the retirement age further.
“Governments in Asia have been under pressure to review their overall retirement schemes to adjust for changing demographic and retirement trends, whether that be raising the retirement age or helping to fund retirement,” said Ms. Cotter. “In turn, investors are also becoming more aware they too need to make adjustments – and work longer to enhance their savings plans.”
The aversion China investors have to an increase in the retirement age is at odds with the rest of the region, and possibly reflects their confidence in the state to provide support. More than a fifth of their retirement income, higher than anywhere else in the region, is expected to come from the state pension, while their savings account for just under a fifth, the lowest in the region.
“It’s worth noting that there’s perhaps greater reliance on state support in China. For example, over 90 per cent of those surveyed expect to rely on public health services in retirement, more than anywhere else in the region,” said Ms. Cotter. “Maybe it’s the legacy of state support in work and life that’s having an influence, particularly for those working in state-owned organizations.”
For more information from the Manulife Investor Sentiment Index in Asia, please visit http://www.manulife-asia.com.