Hong Kong is home to the world's second 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.
The survey showed 86% of Hong Kong investors have set savings aside for retirement, behind Mexico (90%) but ahead of other APAC markets (74%). Comparing findings with a similar survey in 2015, 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.
Level of retirement income not yet achieved
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. In step with the global trend, Hong Kongers are increasingly concerned about the economy globally and locally as well as the high cost of living. All this contributes to a fall in confidence around achieving expected retirement income – from 44% in 2015 to 41% today.
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 (43%) also believe a yield level of more than 10% is reasonable. This makes achieving a desired level of retirement savings more challenging, given the low-rate environment and a more volatile market.
Financial advisors inspire confidence
In terms of 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 advisers. However, investors using financial advisers 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%).
Hong Kong millennials conscious of retirement savings
Hong Kong millennials (those aged 25-35 as at 2017) are also more retirement conscious compared to their APAC peers. Four out of five (81%) have already started preparing for retirement, the highest ratio throughout Asia Pacific (69%). They are not so risk averse as regional peers,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.
The BlackRock Global Investor Pulse Survey 2017 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 the likely impact on their retirement planning.