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Hong kong investors lead all global markets in retirement planning, putting more cash to work to narrow retirement income gap

Jun 29, 2017
By BlackRock

BlackRock’s Global Investor Pulse Survey identifies Hong Kong millennials[*]
as the region’s trailblazers in retirement awareness

Hong Kong, June 29, 2017 – Hong Kong is home to the world’s most retirement-conscious population and leads Asia Pacific in moving out of cash to generate retirement income, according to the BlackRock Global Investor Pulse Survey 2017

BlackRock polled 28,000 individuals in 18 markets – including 1,000 in Hong Kong – with a broad range of questions relating to financial and investment management and likely impact on their retirement planning.

Damien Mooney, BlackRock’s Head of Retail Business for Asia Pacific, said: “It is encouraging to see from our survey that Hong Kong investors are demonstrating very high awareness to save for retirement as they face increasing challenges to underwrite a longer financially-secure future.”

The survey showed 86% of Hong Kong investors have set savings aside for retirement, ahead of all markets both globally and regionally (Asia Pacific 74%). Comparing findings with those of our 2015 survey shows Hong Kong investors are reducing allocation to cash – from 46% to 33%, of their portfolios. That money was moved primarily to invest in equities and insurance-linked products, as a means of achieving financial goals.

However, awareness of retirement needs and a more proactive investment approach have not yet produced the level of retirement income desired by Hong Kong investors. This is partly because all groups surveyed in Hong Kong are underestimating how long they will live, as well as their retirement saving and spending needs. The rise in overall life expectancy is giving rise to eight more years of required expenditure than is being perceived. And in step with investors around the world, those in Hong Kong are increasingly concerned about the economy globally and locally (+14%), as well as the high cost of living (+5%). All this contributes to a fall in confidence around achieving expected retirement income – from 44% in 2015 to 41% today.

Mooney said: “We are delighted to see Hong Kong investors moving out of cash to seek better investment returns in this low-rate environment. They are also savvy enough to realize their cash savings alone will not get them very far into retirement. Reducing the expectation gap becomes an imminent challenge, as Hong Kong’s overall population continues to age.”

Narrowing the retirement savings gap, putting more cash to work and using financial advisors

A strong perception that dividend-bearing equities are the best source of income (49%) and a feeling of comfort around the concept of accumulating cash is motivating Hong Kong investors to remain cash and equity-biased. In fact, this accounts for allocation of some two-thirds of assets (33% cash and 31% equities). The survey found 74% of Hong Kong investors are willing to invest as much as 40% of their cash to grow their savings, but sit on the sidelines because of fears around market volatility and a lack of reassurance that their capital is secure. At the same time, they have high expectations of investment returns (30% of investors hope for annual return in excess of 10%). They also believe a yield level of more than 10% (43%) is reasonable. This makes achieving a desired level of retirement savings more challenging, given the low-rate environment and a more volatile market.

Turning to long-term savings and investment decisions, the survey’s findings reveal a positive correlation between using professional financial advisors and increasing confidence in meeting retirement needs. Hong Kong investors tend to rely on family and friends (41%) as well as online sources (51%) for advice, while only 30% speak to financial advisors. Investors using financial advisors appear to be more positive about meeting retirement income needs (56%) than those not advised (32%). They also appear to have a better understanding of the income they need for retirement (66% vs 49%) so are more confident in their retirement investments (59% vs 41%).

Julia Lee, BlackRock’s Head of Hong Kong Retail Business, said: “It is human nature to leverage multiple channels when making investment decisions that have long-term implications for one’s future well-being. That said, the value of professional advice should not be dismissed. Engaging financial advisors will go a long way towards growing long-term wealth and achieving desired retirement income in an increasingly complex market.”

Millennials in Hong Kong more conscious of retirement savings than Asia Pacific peers

Examining retirement planning behavior among Hong Kong millennials, Lee is encouraged by the fact they are very retirement-conscious and taking a self-starter approach to their planning early on in life.

Four out of five (81%) Hong Kong millennials have already started preparing for retirement, the highest ratio throughout Asia Pacific (69%). They are not so risk averse as regional peers, inasmuch as 68% own equities in their portfolios (vs 42% Asia Pacific millennials) and their allocation in equities (29%) is nearly twice that of Asia Pacific millennials (15%).

Some 80% of Hong Kong millennials are more willing to move out of cash (vs 78% Asia Pacific millennials) but demonstrate less confidence than regional peers when considering whether to invest more of their cash (58% Hong Kong vs 52% Asia Pacific) due to concerns around market volatility.

Lee said: “Hong Kong millennials are setting a good example by starting their retirement planning at an early stage. They are on the right track to developing robust wealth-building plans and stand a better chance of narrowing the retirement income gap – all thanks to adopting the right mindset and investment approach, while seeking assistance from professional financial advisors.”

 

[*] Millennials are those between 25 – 35 in age as at 2017.

 

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About the BlackRock Global Investor Pulse Survey

One of the largest global surveys ever conducted, the BlackRock Global Investor Pulse Survey surveyed 28,000 respondents, in 18 markets. In North America: the US and Canada; in Europe, France, Germany, Italy, the Netherlands, Spain, Sweden, and the UK; in Latin America, Brazil, Chile, Colombia, and Mexico; in Asia, China, Hong Kong, Japan, Singapore and Taiwan. The Hong Kong sample included 1,000 respondents. Executed with the support of TNS Group, an independent research company, the survey took place in January and February 2017. 

 

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