THE results of Aviva's latest survey did not throw up anything new — as with previous polls conducted by other life insurance companies in Singapore, it highlighted that Singaporeans are not saving enough for retirement. According to the Consumer Attitudes to Savings (CAS) Survey 2012, more than a third of people (38%) residing in the city-state have yet to institute a proper savings scheme for their post-working years.
The poll did reveal some insightful statistics concerning older Singaporeans aged 45 to 54, who are often described as at the peak of their career earnings cycle. A surprising 34% of this age group indicated in the CAS survey that they have yet to start saving for their retirement, even though the end of their working lives may be no more than a decade away for a good number of them.
Despite these worrying trends, one piece of good news is that Singapore has the highest average level of savings among 10 countries (the US, three Asian countries and six European nations) surveyed by Aviva in June.
"The good news is that savings levels are pretty good here compared with other places, but if you ask Singaporeans how they feel about retirement, a lot of them are still worried," says Daniel Lum, Aviva's director of product and marketing in Singapore. He believes that this is due to the haphazard and unstructured approach of many Singaporeans in managing their personal finances.
Indeed, 48% of respondents in Singapore claimed they were unable to set aside enough savings on a regular basis. Another 42% said they were saving for other future needs and priorities, such as their children's education or holidays abroad. Another reason for the inability to save for retirement was the clearing of existing debts as stated by 33% of respondents, who could choose more than one reason for their response.
"Some of the reasons for not starting to plan are legitimate but I think it boils down to personal responsibility, and being able to balance different priorities to start planning early," says Lum. "As you wait longer, your investment horizon becomes shorter. So, your time to prepare for retirement becomes substantially less, on top of other issues you may have to deal with."
As part of its consumer education campaign to help Singaporeans work through these issues, Aviva has launched a web portal called Retirement 101. It carries information and online tools that help explain key aspects of the subject as well as financial calculators to provide estimates of the funds that may be needed to finance retirement. Lum emphasises that these tools serve only as useful guides and should never be used as substitutes for detailed professional advice, which any person should seek when dealing with their long-term retirement needs.
A fundamental rule for retirement planning is to invest in a diversified portfolio to manage the risks, says Lum. As one ages, the risk level of one's investment portfolio should also decrease over time, as there will be less time to recover from large losses or excessive market volatility.
To help its clients manage their risks, Aviva has developed an endowment savings policy with a capital guarantee feature known as MyRetirement that allows policy holders to encash their proceeds beginning from a pre-determined age over a 10-year period. While there are fairly similar products in the marketplace, Lum says a distinctive feature of MyRetirement is the capital guarantee, along with guaranteed returns of up to 2.38% a year upon maturity of the policy.
"We did a lot of research and found that the important things for customers were: 'I want my money back and, if I had a choice of guaranteed returns or higher total returns, I would probably still prefer guaranteed returns,'" Lum notes. But he also warns that a product such as MyRetirement is not a "one size fits all" solution to the needs of those planning for retirement. "This is a complement to annuity products such as CPF Life that provides an income for life, which everyone should already have," he says. "MyRetirement has been designed to help customers over the first 10 years to meet their needs in adjusting from the time they are working to when they stop working."
This story first appeared in The Edge Singapore weekly edition of Nov 12-18, 2012.