Hong Kongers have started saving for retirement at higher rates than anywhere else in the world (78%) and are redefining their vision of retirement in the process. According to the BlackRock Global Investor Pulse Survey 2018, Hong Kongers envision a retirement that allows them flexibility and freedom across both their work and life. It also revealed that while money is the number one source of stress for Hong Kongers, people who have started saving for retirement are more likely to report a higher sense of well-being.
BlackRock’s survey polled over 27,000 people globally throughout 13 markets, including around 1,100 in Hong Kong on a broad range of questions about financial and investment management, retirement planning and overall sense of well-being.
The survey showed that the key financial goals for Hong Kongers include a strong focus on retirement. More than half (51%) of those surveyed want to ensure that they can maintain their standard of living in retirement, whereas over a third (39%) wish to earn or accumulate enough money to retire or to retire early.
It also revealed an unexpected finding — that while the notion of financial freedom prompts Hong Kongers’ to start saving for retirement (68%), their ideal retirement now involves continuing to stay in the job market or doing volunteer work (36%) and/or taking up a hobby (25%) (see Table 1). This was true across different age groups. In particular, those who are near retirement (aged 55 to 64) are more eager to engage in part-time or volunteer work (44% vs 27% for the same age group globally). When asked what they will do with retirement investment when they retire, three out of five Hong Kongers aged above 50 said they will keep investing, the highest ratio across all APAC markets. However, many Hong Kong investors intend to do it without the help of professional financial advisers as less than 10% said they will work with a financial advisor to manage their retirement investment (see Table 2).
Table 1. Defining ideal retirement
Not having to worry about money
Having flexible/ part-time/ volunteer work
Taking up a new hobby
Table 2. Ways to handle retirement investment upon retirement (Age 50 or above and had begun investing)
How to use retirement savings
Investment product that can provide fixed amount of regular monthly income
Risk free investments
Give it to a financial advisor to manage
Moreover, amongst the 78% who have started saving for retirement, only half of them (46%) rely on personal savings for retirement in addition to the mandatory contributions to MPF. Simply relying on personal savings or mandatory contributions to retirement funds may leave them vulnerable to market volatility. The key is to understand when and how to start retirement planning, especially in a city where people have one of the longest life expectancies in the world.
Robert Reid, Head of Hong Kong Client Business at BlackRock said, “We are delighted to see the high awareness to save for retirement in Hong Kong as people seek more financial freedom upon their retirement. This makes retirement planning, especially with the help of professional advisers, ever more important if they want the sort of flexibility they aspire to.”
There are many factors defining one’s well-being, but financial stability (59%) and peace of mind (56%) were more important for Hong Kongers than people in other markets. This may help explain why money was identified as the number one source of stress by Hong Kongers (42%), more than work (40%), family (31%) and health (26%). The findings also showed that those who have begun investing are 15% more likely to report a sense of positive well-being, and those who have started their retirement planning are 22% more likely to have a higher sense of well-being.
Reid adds: “This suggests that saving and investing not only provides Hong Kongers with the opportunity to accumulate wealth for the future, but also appears to be an effective way to pay immediate emotional dividends. The earlier you start investing, the easier it is to reach your financial goals and gain peace of mind.”
Hong Kong millennials stack up far ahead of their peers when it comes to investing compared to anywhere else across the globe (86% invest vs 54% globally). Further, there is less of a gender gap between Hong Kong millennial men and women who invest than their global counterparts. In Hong Kong, 88% of men are investing versus 84% of women; the global average sees a stark contrast of 61% of men and 46% of women investing.
Although benefits of investing are clearly recognised, the survey revealed that Hong Kong millennials still find the process confusing. More than half (54%) are uncertain about where to go for advice on retirement planning. Over 60% responded that financial institutions “don’t care about people like me,” and some 80% of them said there are too many investment options. The use of financial advisers has also been declining, with only 30% of all respondents in Hong Kong currently using them.
Reid concludes, “It is encouraging to see the younger generation in Hong Kong embrace investments at such an early stage. That said, much more education is needed to enhance millennials’ financial literacy to help them find the suitable assets to invest in. Their instincts are there, but the process to provide them with advice and options needs a lot of improvement.”
Note: Millennials are those between 25 and 37 in age as at 2018.