Over half (57 percent) of all respondents in Hong Kong have not started saving for retirement, while 40 per cent of those aged 50+ have not begun retirement savings preparations, according to a survey conducted by Franklin Templeton.

The firm announced the release of its Retirement Income Strategies and Expectations (RISE) survey for the first time in Greater China (Hong Kong, Mainland China and Taiwan), to explore individual attitudes and concerns about retirement, as well as their progress – or lack thereof – in preparing and investing for their future.

The global survey also showed that personal savings is the top retirement funding source in Greater China, according to 32 percent of respondents in Hong Kong, 25 percent in mainland China, and 28 percent in Taiwan. While respondents in Greater China tend to rely more on personal savings, government or company-sponsored retirement plans are more popular among US respondents.  

Traveling is cited as the most popular retirement wish in Hong Kong, with 28 percent wanting to see the world. However, complacency seems to be an issue when it comes to realizing retirement wishes. Younger respondents aged 25-34 expect to retire at 59 years old on average, while the average expected retirement age for respondents aged 50+ is 65 years old.

When reality hits, nearly half (49 percent) of respondents indicate that they would continue working and consider postponing retirement if they do not have sufficient savings. 

Stephen Tong, client portfolio manager at Franklin Templeton Multi-Asset Solutions, says, “Understanding your own financial goals would result in better retirement planning and can help Hong Kong pre-retirees gain confidence in their preparations for whatever type of retirement plans and wishes they envision.”

Alan Young, head of Institutional Business for Greater China at Franklin Templeton, says, “We believe there is a need to raise the awareness of retirement financial preparation across all generations – be it millennials who desire to retire early, or pre-retirees who plan to delay their retirement.”

In terms of retirement investment strategy, 66 per cent of respondents prefer investing in stocks. This is due to the fact that a majority of respondents think it is crucial for retirement investments to generate dividends or interest. Respondents tend to take planning in their own hands when it comes to investing for retirement.

Half of the respondents who are currently saving for retirement report that they review their planning strategy on a monthly basis. Although slightly over half (53 percent) of respondents think that it is essential to work with a financial advisor on retirement planning, only 32 percent of respondents actually do so, and just 24 percent of respondents have a written retirement plan.

  “A diversified portfolio can help ride the wave of volatility by investing in different asset classes. Getting professional advice and formulating a retirement plan is a vital step towards bridging retirement funding gap to ensure that investors can meet their goals,” says Ricky Chau, vice president and portfolio manager at Franklin Templeton Multi-Asset Solutions.   

With a view of encouraging pre-retirees to save early for retirement and strengthening pre-retirees’ financial discipline, the Hong Kong government has recently launched a program by offering a tax break of up to HK$60,000 (US$7,660) to Mandatory Provident Fund (MPF) members who make Tax Deductible Voluntary Contributions (TVC). Nearly half of the respondents (44 percent) would consider enlarging their own MPF investment contributions for tax reduction purposes. 

“We, as the pioneer of the Hong Kong equity smart beta strategy in pension space, see it as an encouraging sign that pre-retirees are willing to employ such measures to increase their contributions in MPF. More innovative and non-traditional types of investments products are needed to fuel the pension industry,” says Tong.    

Retirement concerns

·      Nearly three-quarters (71 percent) of respondents express concerns over health issues, and 78 percent of respondents are concerned about medical and pharmaceutical expenses in retirement. This is, however, not only a key concern for Hong Kong, but a global issue for pre-retirees. While it remains as a top concern for both mainland China and Taiwan, a quarter of US respondents also share the same sentiment. 

·      Over half (52 percent) of respondents are worried about running out of money for retirement. This concern about insufficient funds appears to be well founded, as over three-quarters (77 percent) of respondents said the cost of living is high to retire in Hong Kong. Cost of living essentially becomes the main hurdle for Hong Kong residents looking to retire in their own market, with respondents citing a willingness to relocate elsewhere. The top three destinations are Taiwan, Greater Bay Area (excluding Hong Kong), and Australia. 

Additional key findings

·      Forty-one percent of the respondents in Hong Kong think ESG investing in retirement planning is important. Forty percent of pre-retirees would likely to invest in a retirement fund that has a socially responsible investment option. Millennials indicates higher interest in such product.

·      Sixty-eight percent of pre-retirees are aware that they are behind on their goals in retirement saving. There is a significant retirement funding gap – the average realistic target saving for retirement is HK$5.7 million while the average current saving that respondents have for retirement is HK$1 million.

RISE Survey Methodology

The Franklin Templeton Retirement Income Strategies and Expectations (RISE) survey was conducted online among a sample of 1,037 adults in Hong Kong comprising 514 men and 523 women, and a sample of 1,114 adults in tier one cities in mainland China (Beijing, Shanghai, Guangzhou and Shenzhen) comprising 583 men and 531 women.

The target respondents were working population aged 25 or above with monthly personal income of HK$12,000 or above in Hong Kong and 5,000 yuan (US$702.45) or above in mainland China. The survey was administered between April 16 and May 2 by The Nielsen Company (Hong Kong) Limited, which is not affiliated with Franklin Templeton.