By Yvonne Chan
POSTED: 22 Jul 2013 11:11 PM
SINGAPORE: To encourage more Singaporeans to start investing early for retirement, the Singapore Exchange (SGX) and POSB have come up with a new product that allows one to invest in exchange traded funds while also saving for retirement.
SGX added that it is on the lookout for potential partnerships that can make long term investing more accessible for their customer base.
Ninety-seven per cent of Singaporeans’ retirement funds are tied up in fixed deposits, property and insurance, and the remaining three per cent are in equities, mutual funds or unit trusts, revealed a SGX-Oliver Wyman study on retirement savings.
A low interest rate environment and rising inflation has eroded the dollar value of one's savings, especially retirement savings. Far more retirement savings in Singapore are still held in fixed bank deposits than in many other countries, said the SGX-Oliver Wyman study.
Only 12 per cent of investible CPF savings are held in equities versus the 50-70 per cent in a range of other countries including US, UK, Hong Kong, Malaysia and Australia.
Research shows that 41 per cent of Singaporeans have never saved specifically for retirement while 60 per cent of Singapore's working adults save less than 20 per cent of their monthly income.
With families becoming smaller, experts say it is increasingly less viable for Singaporeans to depend on their children for financial support in their retirement years.
By the time Singaporeans reach retirement age, CPF savings will only be sufficient to meet 68 per cent of their pre-retirement income, revealed the SGX-Oliver Wyman study.
But with the new POSB Invest-Saver product, a combination of a regular savings plan and exchange traded fund, saving for retirement could start from as little as S$100 a month with no brokers involved.
An exchange-traded fund is an investment fund traded on stock exchanges, much like stocks.
Potential investors can subscribe for the product via any of 1,100 ATMS islandwide.
The POSB Invest-Saver is linked to the Nikko AM Singapore STI ETF, an exchange-traded fund that tracks the performance of Singapore’s top 30 blue chip companies.
DBS, the largest local bank in Singapore, hopes that the product will make long term investing more manageable for young Singaporeans.
Tan Su Shan, managing director and group head of Consumer Banking and Wealth Management at DBS Bank, said: "Singaporeans are a little bit barbelled in their investment approach. We either have cash or we have properties, so either very liquid or very illiquid and possibly not enough in fixed income or equities. So this speaks to the asset diversification that we're trying to promulgate right now."
Chew Sutat, executive vice president of SGX, said: "If you look at the amount of cash savings we have, both in CPF systems and banking deposits, every year we as a nation are potentially leaving S$3-5 billion of investment returns on the table by not investing.
"As long as we have like-minded partners who share common goals of wanting to bring more accessible investing to their customer base… we'll be happy to support them."
Potentials investors in this latest product could expect to reap an annual average return of between 2 and 3 per cent.