2006 News Releases

According to survey, people overlook longevity risk and are financially under-prepared

Hong Kong - Hong Kong people have a poor understanding of the timeframe involved for retirement planning, and well over half are worried about the impact of unexpected health costs on their life savings, a just-released survey by Manulife (International) Limited found.

The survey also confirmed that Hong Kong people are not financially prepared for retirement, with more than half of the respondents expecting they will have to reduce their monthly expenditure by half after they retire.

The survey, conducted by a global market research firm Synovate, covering 401 general respondents aged 45 or above (237 pre-retirees and 164 retirees) with minimum household income of HK$20,000 per month and also 105 affluent respondents with minimum investable assets of HK$1 million, revealed their attitudes and concerns about retirement planning.

In the pre-retiree group, 82 per cent of respondents expected that their retirement savings needed to last only 20 years or less to support them, and 65 per cent of the retirees surveyed held the same belief. The survey also found that among all general respondents, the estimated retirement age was about 57 – while in fact, the average retirement age could be as early as 52 among current retirees.

“Longevity risk is very misunderstood and Hong Kong people will spend far more years in retirement than they estimate,” said Michael Huddart, Executive Vice President and General Manager for Hong Kong, Manulife (International) Limited.

“Based on the government statistics 2003, life expectancy for males in Hong Kong is 79 years and that for females is 84 years. Assuming retirement at age 57, one would need savings to last at least 25 years.”

With Hong Kong’s population aging rapidly, 62 per cent of the general respondents and 52 per cent of the affluent respondents interviewed in the study said that unexpected healthcare costs were their primary concern during retirement. Other major causes for concern about retirement revolved around investments and performance of existing investments, including:

• That income would not keep up with inflation
• That income would be reduced as investments shrink through market downturns
• That income would fluctuate depending on the performance of investments
• That they would run out of money because investments would not earn a high enough return

Access to savings in case of emergency was the main financial goal during retirement, with 36 per cent of general respondents mentioning it as their top priority, while maintaining control of investments with the ability to change them over time was cited by 23 per cent of affluent respondents as their top priority.

Both the retiree and pre-retiree groups expressed extreme apprehension about their ability to protect their money from forces beyond their control. More than half of the pre-retirees (64 percent)/retirees (57 per cent) anticipated they would experience a weaker financial status or a deteriorating lifestyle at old age. Nearly two in five retirees (38 per cent) found themselves financially worse off in retirement when compared to their expectations, and on average about 53 per cent of general respondents and 57 per cent of affluent respondents expect they would have to reduce their monthly expenditure by half after they retire.

The survey confirmed that Hong Kong people are not financially prepared or confident they have plans in place to deal with the financial demands of retirement. Only 29 per cent of those general respondents had any financial plans in place for a regular income after retirement. This was despite the fact that most of the general respondents (69 per cent) believed that Mandatory Provident Fund (MPF) or company pension would account for less than 40 per cent of their retirement needs.

It also confirmed the urgent need for a solution which will help revolutionise the way Hong Kong people plan for their retirement and bring peace of mind to all those who are presently having nightmares about what should, after all, be one of the happiest times of their lives.

“With one of the longest life expectancy rates in the world, Hong Kong people are looking at perhaps a quarter of their life spent in retirement,” said Mr. Huddart. “If you have worked hard all your life, and been careful with your money, you deserve not to have to worry about your finances when you arrive at an age when you should be enjoying the fruits of your honest endeavours.”

Notes to editor:
Research conducted with 506 Hong Kong people age 45+
Methodology: Intercept + face-to-face interviews
Sampling:
Random Segment = 401 general respondents with minimum monthly income of HK $20,000/month
Affluent Segment = 105 affluent respondents with minimum investable assets of HK$1 million
Age, gender & employment sampling consistent with HK population distribution so results are statistically significant and representative

About Manulife (International) Limited
Manulife (International) Limited is a member of the Manulife Financial group of companies. Manulife Financial is a leading Canadian-based financial services group serving millions of customers in 19 countries and territories worldwide. Operating as Manulife Financial in Canada and Asia, and primarily through John Hancock in the United States, the Company offers clients a diverse range of financial protection products and wealth management services through its extensive network of employees, agents and distribution partners. Funds under management by Manulife Financial and its subsidiaries were Cdn$381 billion (approximately HK$2,659.8 billion) as at September 30, 2006.

Manulife Financial Corporation trades as 'MFC' on the TSX, NYSE and PSE, and under '0945' on the SEHK. Manulife Financial can be found on the Internet at www.manulife.com.

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For more information please contact:
Helena Lee / Jeanie Ho
Manulife (International) Limited
Tel: (852) 2202 1050 / 2510 3191
Fax: (852) 2234 6875
Email: helena_lee@manulife.com
jeanie_ho@manulife.com