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St. James’s Place Asia (“SJP”) has today launched a new study which finds that 58% of Singaporeans and Hongkongers aged between 45 and 64 have not considered planning for their retirement, and 64% have not accounted for inflation in their financial planning.

Titled Never Too Late to Plan: Preparing for the Golden Years, the study looks at the financial hurdles faced by those in the later stages of their lives and careers, aged between 45 and 64 years.

This comes at a time when Singapore’s retirement age has increased from 62 to 63 as of July 2022[1], with plans to gradually raise it to 65 by 2030. Hong Kong, on the other hand, has an official retirement age of 65 years. With an average life expectancy of 83.5 and 85.2 years in Singapore and Hong Kong respectively, this means that Singaporeans and Hongkongers are likely to spend at least 20 years in retirement.

Growing Concern About Retirement Preparations

The study finds that 66% of Singaporeans and Hongkongers in this age range say the fallout of COVID-19 has made them more concerned about planning for their retirement. As a result, over two thirds (67%) are worried about their ability to cover healthcare costs in their retirement with 64% expressing concerns about being a financial burden to their families.

This inaction may be due to a lack of awareness, with 59% saying they do not fully understand the financial products and services available to help them plan for retirement, as well as managing immediate financial issues spurred by the pandemic – with close to half (46%) needing to draw down from or reduce retirement contributions since the start of the pandemic.

Owing to this uncertainty, 72% of those surveyed in Singapore and Hong Kong are making lifestyle sacrifices now in the hope they can enjoy a better retirement. In retirement, most anticipate they will need to make further spending cuts, including reducing expenditure on luxury goods (46%), social life (35%), and travel (33%).

Oliver Wickham, CEO, SJP Hong Kong, said: “It is concerning that high levels of unpreparedness around retirement planning still persist, especially in the face of increasing economic volatility and skyrocketing inflation. With people spending longer periods in retirement in the future, having a sound financial plan should be priority as it can go a long way towards easing some of the associated stress and anxiety while achieving a more comfortable retirement.”

Wealth Transfer Placing Pressure on Family Relationships

 The study further finds a high level of uncertainty around wealth transfer, with 64% of Singaporeans and Hongkongers in this age group saying they lack understanding about how to manage intergenerational wealth transfer effectively, and 65% do not understand the tax implications they may face.

As a result, 57% say wealth transfer and succession planning is a source of stress in their life, and 50% say that it is causing disharmony among their family members.

A low level of action is also seen, with 60% saying they do not have a will, while a far higher number (83%) have life insurance. Close to half (46%) have not made any plans to transfer their wealth or assets to family members, but 44% of these people say they plan to do this within the next five to 10 years.

A strong trend is also seen in donating wealth to philanthropic causes, with 42% planning to do this. While 84% say their family members are aware of these wishes, having a will in place can ensure that the distribution of assets is managed according to the person’s wishes while minimising the possibility of disputes arising amongst family members.

Gary Harvey, CEO, SJP Singapore, said: “Wealth transfer and succession planning unfortunately comes with many potential planning and emotional pitfalls that one must be carefully prepared for. While having wealth transfer conversations with loved ones can be challenging, it is an important first step towards ensuring peace of mind and avoiding major issues. The high number of Singaporeans over 45 who still do not have a will is deeply concerning and may be due to people wanting to avoid tough conversations or delaying thinking about the inevitable. Seeking professional, third-party financial advice can help alleviate this stress and provide clarity and assurance to all involved that their commitments and wishes can and will be met.”

Welcoming of Financial Advice in Turbulent Times

Despite the uncertainties and lack of preparedness in retirement and wealth planning, most Singaporeans and Hongkongers approaching retirement welcomed professional financial advice, with 76% saying they have sought this out before making major financial decisions.

Investments (85%), followed by retirement planning (73%) and insurance (72%), are the areas indicated of highest need for receiving better professional financial advice.

While 90% say the professional financial advice they have received is useful, currently only 53% engage a financial adviser to help manage their investments. The main reasons cited for not doing this is a belief that they can sufficiently manage their own investments (36%), concern about fees (26%) or lack of trust in a third party (16%). However, 55% also believe they could have achieved larger returns on their investments in the past one to five years if they had engaged a financial adviser.

Top sources of financial advice for Singaporeans and Hongkongers over 45 years of age are now independent advisers and banking relationship managers, surpassing family as the leading source of advice for almost every investment type. Receiving advice face-to-face is critically important to 76% of this age group. For long term planning, most would prefer to visit a financial adviser (42%) or their bank (38%) over engaging with a robo-advisory platform at just 20%.

Gary Harvey, CEO, SJP Singapore, said: “It is heartening to see that so many Singaporeans over 45 are receptive to financial advice as they approach retirement, which is notably higher than for other age groups. This openness to advice is likely due to the increasing complexity of our financial affairs as we age, and the need to plan carefully to avoid passing on issues to the next generation. The findings echo our belief that personalised, face-to-face interactions with financial advisers remains critical for building trust and ensuring action is taken. “

Oliver Wickham, CEO, SJP Hong Kong, said: “The pandemic has created many uncertainties that have had a profound impact on retirement planning, with over 70% looking at how they might sacrifice their lifestyles today for a better retirement. It is positive to see a significant proportion of Singaporeans and Hongkongers over 45 who are receptive to financial advice as they approach retirement, confirming that there is always going to be a high demand for financial advice and planning that will likely not diminish when times get tough.”