News eDaily22 Sep 2017

Asia:Government's help critical to building retirement security

| 22 Sep 2017

The pace of ageing is quickening in Asia and this has urgent implications for the region's markets and societies. Regulators and policymakers must play their parts as enablers to the insurance industry, working together to build the bridge to retirement security for the region's population, said speakers at the 13th International Longevity Risk and Capital Markets Solutions Conference in Taipei yesterday.

With the rapid pace of demographic and societal changes, understanding the needs of individuals and families is more crucial than ever, said Mr Dylan Tyson, Executive Vice President and former chief strategy officer at Prudential of Korea. He added that retirement is an important issue for people of all socio-economic groups, thus a strong partnership with policymakers is critical for developing private-sector solutions, such as longevity risk pooling, while ensuring robust foundations for consumer protection and financial stability.

Ms Amy Kessler, Head of Longevity Risk Transfer at Prudential Retirement also emphasised the need for governments to promote financial literacy; encourage access to advice; permit tax-advantaged retirement saving; establish capital and reserve requirements that support prudent, well-capitalised risk-taking; and to deepen the long-term bond and inflation-linked securities market.

For the individual, retirement security ideally should start from a person’s first pay check, she said. “It takes time and discipline, but with every one that we’re able to help, it will dramatically improve the last 30 years of their lives.”

And as a first step, there is a need to overcome natural human behaviours of procrastination and the longevity disconnect (or the disbelief that one will live very long) with auto-enrolment; the optimism bias (that income will continue to grow) and resultant impulse spending with auto-escalation; and choice paralysis and overreaction through offering target date funds, which relieves people from the challenge of investing for their retirements themselves.

Ms Kessler also elaborated on ways for life insurers to create lifetime solutions that add value for individuals, while carefully managing risk and capital. Annuity solutions, she suggested, which have been effective in the US and other markets, can be adapted to help solve Asia’s retirement funding challenges. That being said, she acknowledged that the development of annuities in the region remains in nascent stages and could possibly take several more years before they gain traction. 

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