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Tuesday, January 28, 2014

S'poreans misjudge 3 aspects of retirement: Manulife

Published January 28, 2014
By Genevieve Cua

SINGAPOREANS expect to retire at 61 and continue working for nine years, the latest Manulife Investor Sentiment Index survey has found.

But Manulife said they may have misjudged three aspects - the actual duration of their retirement, their daily expenditure and ability to work in retirement.

Annette King, Manulife Singapore president and chief executive, said: "Given the rising cost of living in Singapore and the fact that people here are living longer, the amount saved for retirement may seem fine now, but simply won't work in, say, 10 years' time.''

Singaporeans expect to continue working the longest at nine years, compared with the average expectation of six years among other respondents in the region.

The Manulife ISI is based on more than 500 interviews with respondents in eight Asian countries, including Hong Kong, China, Taiwan and Japan.

Singaporeans expect retirement to last 19 years including nine years of work, suggesting a life expectancy of 80 years. The average Singaporean now lives to 84, and about half may live longer.

This suggests their savings may be insufficient. Retirement expenditure is expected to be 65 per cent of current income, but in reality, with inflation, the amount could be larger.

In addition, while nearly three-quarters of respondents expect to work in retirement, the actual participation rate is much lower at 40 per cent among 65 to 69 year olds, and less than 15 per cent for those over 70.

Ms King said elderly employment levels are generally well below the level that respondents expect. "This may be because retirees are more selective about the jobs they take; (they look) for positions that offer flexible work schedules ... Or they may have elderly-related health issues that prevent them from working.''

Singaporeans' investment choices are overly cautious as well. They hold an average 33 months of personal income in cash, well above the regional average of 21 months. Of that cash, a fifth is set aside for daily and unexpected expenses. The balance is underutilised and losing value due to inflation.

Meanwhile, in terms of investor sentiment in the region, cash and own-residence property remained the two most favoured asset classes. Sentiment towards equities rose modestly, albeit from a low level.

Sentiment towards fixed income remained substantially above equities. But it ranks the lowest in terms of actual investments, accounting for just 5 per cent in portfolios.

Endre Peterson, managing director of fixed income at Manulife Asset Management, said: "We see reasons for investors to shift their exposure from a non-performing asset class like cash to fixed income securities with higher recurring income potential in 2014.

"Over the medium term, we expect fixed-income investment to continue delivering positive returns. We think it's best to focus on corporate debt on a selective basis because we think it will generate higher average returns than sovereign debt in the current market.''

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