New Retirement Preparedness Indicator highlights financial and economic
factors influencing retirement readiness in Asia
Research reveals varying degrees of retirement preparedness across Asia and
points to the need for rapidly aging populations to mobilise private savings
to shoulder some responsibility for retirement provision
TORONTO, Nov. 14, 2012 /CNW/ - Manulife Asset Management has issued a report
that introduces its Retirement Preparedness Indicator, which highlights the
financial and economic conditions influencing the ability of individual
economies to provision for their aging populations. The report covers 11 Asian
countries and territories and finds that many face significant challenges to
retirement financing at both the state and the individual levels.
The report, entitled Funding the golden years: The financial and economic
factors shaping retirement provision for Asia's rapidly aging populations, is
part of Manulife Asset Management's Aging Asia research series and builds on
the findings of its June 2012 publication: Saving up: The changing shape of
retirement funding in a greying ASEAN. The previous publication revealed how
ASEAN countries once considered to be among the most 'youthful' in Asia are
actually aging more rapidly than most realise. For a copy of the report,
please contact firstname.lastname@example.org.
The new report divides the subject countries and territories into three broad
categories of retirement preparedness. Those deemed to be facing the 'most
favourable conditions' are Taiwan, Hong Kong and Japan, which are typified by
high levels of financial wealth, high state pension coverage and
well-developed financial markets. However, they also face some of the most
dire demographic profiles and slowing economic growth prospects. Those judged
to have 'favourable conditions' are Singapore, China, Malaysia and Thailand.
With the exception of Singapore, these countries tend to have lower levels of
financial wealth and state pension coverage but have high savings rates,
robust economic growth potential and relatively positive demographic profiles.
Those deemed to be facing 'challenging conditions' are Indonesia, South Korea,
Vietnam and the Philippines. Except for South Korea, these countries generally
have very low levels of government pension coverage, the lowest levels of
financial wealth and shallow financial markets. On the other hand, they are
likely to see income and savings rates rise and enjoy relatively favourable
demographic profiles. What differentiates South Korea from this group is that
it faces the twin challenges of a rapidly growing elderly population and
rapidly declining elder support ratio. However, its relatively high financial
wealth and high savings rate work in its favour.
The report reveals that it is ultimately the interplay between demographic,
financial and economic factors that will determine whether or not Asian
countries and territories will become rich enough to sufficiently fund
retirements before they become too old.
Oscar Gonzalez, economist at Manulife Asset Management, pointed out that:
"While countries facing 'favourable conditions' and 'challenging conditions'
tend to have lower levels of accumulated wealth, factors such as relatively
positive economic outlooks and high savings rates work in their favour. For
example, China is expected to see per capita real GDP growth of 6% per annum
between 2011 and 2050. Despite its demographic challenges, this robust growth,
combined with a historical savings rate of 47%, implies that individuals in
China are still well positioned to contribute to financing their own
retirements if appropriate savings vehicles and incentives are available."
Gonzalez added "In many of the countries facing 'challenging conditions', the
positive impact of robust GDP growth and high savings trends will be amplified
by relatively attractive demographic profiles. Working age populations in
Indonesia, the Philippines and Vietnam are expected to continue to account for
about 60% of the total populations through 2050. This means that retirement
preparedness in these economies will likely be enhanced by the addition of
significant numbers of new savers over the coming decades."
Michael Dommermuth, president of Manulife Asset Management Asia, commented on
the report's conclusions: "Asia as a whole is aging much more rapidly than
most realise and individual countries and territories face varying conditions
that affect their abilities to provide for their growing retired populations.
With mandatory pension plan coverage below 50% in the majority of the
economies we studied, this report reveals that most public retirement schemes
in the region will need to be supplemented. The ability to do so hinges on the
availability of secure savings vehicles that unlock the potential to grow
personal savings. In a region with historically high savings rates, this is
strongly influenced by government policy support for enhancing financial
market depth and the level of private sector interest in alternative savings
mechanisms such as mutual funds and investment-linked insurance products."
The report points out that Asia is likely to experience an increased shift in
responsibility for retirement funding from the state to the individual. As
this shift takes place, Dommermuth anticipates a growing need for investment
products such as asset allocation funds that help build pension pots and,
ultimately, income generating products that generate steady cash flow in
Manulife Asset Management has considerable experience building multi-asset
solutions designed to meet specific client objectives and constraints. Its
dedicated asset management unit, the Portfolio Solutions Group, has investment
professionals across the U.S., Canada and Asia managing more than US$90
billion in asset allocation funds, making Manulife Asset Management one of the
world's leading asset management firms.
Dommermuth concluded: "Based on market knowledge gleaned from our footprint
across 10 countries and territories in Asia, we know how to provide customised
investment solutions that meet local market needs. This is why, when it comes
to retirement solutions, Manulife has launched mutual funds and participates
in the pension business in Hong Kong, issued fixed annuity insurance products
in Japan and launched investment-linked plans that provide a regular income
stream in Singapore, for example. We are also proud to have been selected as a
provider for Malaysia's Private Retirement Scheme, which is one example of
pension provision reform that has already been put in place."
Notes to editors:
1) How is the Manulife Asset Management Retirement Preparedness Indicator
The Manulife Asset Management Retirement Preparedness Indicator is composed of
financial and macroeconomic components that together describe the environment
facing pensioners within 11 countries and territories in Asia.
The financial component (70% of the overall indicator) looks at vital factors
such as a country or territory's financial wealth, coverage ratio, average
income, sovereign bond default rate and net pension wealth. It seeks to
quantify the conditions that affect both a state's ability to provide for its
prospective pensioners and an individual's ability to bear some of the
responsibility for their own pension provision.
The macroeconomic component (30% of the overall indicator) quantifies the
'bigger picture' factors which will weigh on both states and individuals in
the years to come, but which are largely beyond the influence of private
citizens. These include support ratios (i.e., the proportion of working age
people relative to retirees), gross national savings and forecasted GDP per
capita growth rates.
2) Net pension wealth is defined as the size of the lump sum that would be
needed to buy the flow of pension payments, net of personal taxes and social
security contributions, promised by the pension system in an economy. (Source:
OECD Asia/Pacific 2011)
3) What percentage of the populations of the 11 countries and territories
analysed are covered by government-mandated pension plans?
Hong Kong 56%
Note: Coverage ratio = percentage of population covered by mandatory plan
4) What are the historical gross national savings rates of the 11 countries
and territories analysed?
Gross national savings*
Hong Kong 31%
Note: * Average 2000-2011 gross national savings as a % of GDP Source:
National Statistics Offices & Global Insight
About Manulife Asset Management
Manulife Asset Management is the global asset management arm of Manulife
Financial. Manulife Asset Management provides comprehensive asset management
solutions for institutional investors and investment funds in key markets
around the world. Manulife Asset Management also provides investment
management services to affiliates' retail clients through product offerings of
Manulife and John Hancock. This investment expertise extends across a broad
range of asset classes including equity, fixed income and alternative
investments such as real estate, timber, farmland, as well as asset allocation
Manulife Asset Management has investment presence in the United States,
Canada, the United Kingdom, Japan, Hong Kong, Singapore, Taiwan, Indonesia,
Thailand, Vietnam, Malaysia and the Philippines. In addition, it has a joint
venture asset management business in China, Manulife TEDA. It also has
operations in Australia, New Zealand, Brazil and Uruguay. John Hancock Asset
Management, Hancock Natural Resource Group and Declaration Management and
Research are units of Manulife Asset Management.
Manulife Asset Management was named Best Asian Bond House for 2011 by Asia
Asset Management. As at 30 September 2012, assets under management were US$228
billion. Additional information about Manulife Asset Management can be found
About Manulife Financial
Manulife Financial is a leading Canada-based financial services group with
principal operations in Asia, Canada and the United States. In 2012, we
celebrate 125 years of providing clients strong, reliable, trustworthy and
forward-thinking solutions for their most significant financial decisions. Our
international network of employees, agents and distribution partners offers
financial protection and wealth management products and services to millions
of clients. We also provide asset management services to institutional
customers. Funds under management by Manulife Financial and its subsidiaries
were C$515 billion (US$523 billion) as at 30 September 2012. The Company
operates as Manulife Financial in Canada and Asia and primarily as John
Hancock in the United States.
Manulife Financial Corporation trades as 'MFC' on the TSX, NYSE and PSE, and
under '945' on the SEHK. Manulife Financial can be found on the Internet at
Brian Carmichael, Manulife Asset Management, +1-617-663-4748,
email@example.com, or Ginie Lam, Manulife Asset Management (Asia)
Ltd., +852 2202 1965, firstname.lastname@example.org
SOURCE: Manulife Asset Management
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-0- Nov/14/2012 18:23 GMT
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