FTLife Insurance Company Limited (FTLife) has conducted a "Retirement Planning and Confidence Survey" in December 2020. The survey revealed increased pessimistic about retirement among respondents since the start of the pandemic.
Before the outbreak, around 16% said that they lacked confidence in retirement. During the pandemic, the number quadrupled to around 70%, illustrating how the pandemic has intensified Hongkongers' worries about retirement.
The top three worries cited are rising retirement medical expenses (53%), a lack of stable income post-retirement (52%) and greater difficulty coping with retirement expenses (50%).
Younger generation fall short on mid- to long-term financial planning
About a quarter (24%) of the respondents said their investment awareness has improved due to the uncertain economy. However, two fifths (41%) are concerned about not making good investment decisions in the current volatile market owing to a lack of market and investment knowledge.
This is especially true among the younger generation. Half (52%) of the younger respondents (aged 20 to 29) said they lacked knowledge on investment products and nearly three fifths of them (59%) said they did not know how to do mid- to long-term financial planning. Almost three quarters (73%) said they have no regular saving habits.
Only 17% of those respondents aged 30 and over said they have no regular saving habits, with 40% saying they did not know how to do such financial planning. That said, about one-third (35%) of this group said that they didn't have enough knowledge about investment products.
People have become increasingly risk-averse
Due to the volatile market and the pandemic, Hongkongers have become more risk-adverse leading to the adoption of more conservative investment strategies. Nearly two fifths (37%) of those surveyed prefer to hold cash savings, especially those aged between 20 and 29 (62%). A quarter (25%) of the respondents are more interested in capital guaranteed or low-risk investment.
As the pandemic continues and dents Hongkongers' confidence in retirement, more respondents expressed their desire for a stable income in retirement (55%) and acknowledged that qualifying deferred annuity plan is a suitable first step of retirement planning (41%).
FTLife Chief Commercial Officer and Chief Product Officer Christine Yeung said: "Our latest survey found that Hongkongers' confidence in retirement dropped during the pandemic and many young people did not have regular saving habits. This may result in missing the best timing to save for retirement and to achieve the rolling effect of compound interest.
“Regardless of any economic cycle, it is best to plan retirement early. For Hongkongers with limited amount of capital and little investment experience, they can consider subscribing to a qualifying deferred annuity plan to start saving early. They can enjoy tax deductions while taking the first step to plan for retirement."
With regard to the public's retirement needs under the pandemic, FTLife further investigated the public's acceptance rate of a qualifying deferred annuity plan in the survey. The pandemic has prompted people to review their retirement protection needs. More than three fifths (62%) of the respondents are interested in subscribing to a qualifying deferred annuity plan in the coming year. The most attractive features of such a plan include: stable income in retirement (82%), regulatory supervision (53%), payment in installments involving smaller amounts (47%), tax deductions (45%), higher guaranteed cash value and lower investment risk (30%).
Minimum issue age of 20 for FTLife's Prosperous 2 helps customers plan ahead
In response to increasing public demand of worry-free retirement, FTLife is launching the Prosperous Deferred Annuity Plan 2 (Prosperous 2) and setting the minimum issue age at 20 years old. This will allow customers to start their retirement planning at an early age and enjoy tax deductions at the same time.
Prosperous 2 is certified by the Insurance Authority as a tax-deductible qualifying deferred annuity policy, with options for Premium Payment Period and Accumulation Period.
Customers can accelerate potential wealth growth through guaranteed cash value and non-guaranteed terminal dividend. The guaranteed breakeven period can be as short as eight years and the range of total internal rate of return at maturity is between 3.28% to 4.32%.
During the annuity period, Prosperous 2 provides two extra protection that are exclusive in the market: Travel Accidental Benefit and Terminal Illness Benefit.
Ms Yeung added: "Prosperous Deferred Annuity Plan has been welcomed by customers since its launch. The enhanced version is being launched during this special period to meet market demand and provide Hongkongers with a simple but reassuring retirement plan. This is to encourage more people to plan their retirement ahead, benefit from compound interest return for a longer period, and utilise the best time to save for retirement.
"With the diversified Voluntary Health Insurance Scheme that FTLife offers, we are confident to provide customers of different ages an ideal retirement planning package, helping customers achieve a stable and independent retirement life while protecting capital and against health risks."
From now until 31 March 2021, customers who successfully subscribe to Prosperous 2 as well as one of the designated Voluntary Health Insurance Scheme plans or insurance plans (basic plan/rider) can enjoy up to 15% of first-year premium refund.
About Retirement Planning and Confidence Survey
FTLife Insurance Company Limited ("FTLife") commissioned a market research company to conduct "Retirement Planning and Confidence Survey" to understand how the pandemic has affected retirement planning, investment preference and behaviours in Hong Kong. The survey was conducted in December 2020 to collect data from 405 working people aged 20 or above through street interviews. The survey mainly targets people with personal monthly income above HK$20,000.
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