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Asia: Family no longer regarded as primary source of support in retirement - GAI-Prudential survey

Source: Asia Insurance Review | Oct 2015

Citizens almost everywhere in East Asia are highly concerned about their retirement security, and are eager to improve their retirement preparedness, according to findings from a study on retirement attitudes and expectations in the region, conducted by the Global Aging Institute (GAI), in partnership with Prudential Corporation Asia. What is also striking is the rejection of the family as the main financial source of support in retirement, representing an “almost tectonic shift” in attitude and expectations, said GAI Founder and President Dr Richard Jackson.
   The study, titled “From Challenge to Opportunity: Wave 2 of the East Asia Retirement Survey”, revealed that an overwhelming majority of respondents in every market rejected the traditional expectation that the family should be primarily responsible for providing for the elderly. However, different markets have different views about who should take the place of the family in guaranteeing retirement security.
   In South Korea, Singapore, Hong Kong and Taiwan, a majority of respondents felt that retirees themselves should be responsible for their own retirement income whilst in Malaysia, Indonesia, Vietnam, China, the Philippines and Thailand, a majority felt that the government should assume the primary role in retirement security.
   Although the family’s role in retirement security has diminished over the years, most respondents want to see it shrink even further. But a lack of viable alternatives to close the retirement security gap is cause for concern.
East Asians eager to improve retirement prospects
Notwithstanding, workers in East Asia are eager to improve their retirement prospects, Dr Jackson said. The study uncovered that East Asians show a “remarkable willingness” to support retirement reform even where solutions required “personal sacrifice” such as workers having to save more for their retirement, raising retirement ages, increasing taxes to help fund basic pension benefits for poor elderly, and requiring workers to contribute more to pay for government pension programmes.
   It should also be noted that “there is widespread demand for translating lump-sum pension payments into retirement income streams”, he said.
Strategic steps for policymakers to narrow retirement gap
The enormous challenge facing East Asia’s ageing populations also presents an enormous opportunity to build more adequate and sustainable retirement systems. As such, there is a critical role for both governments and the financial services industry to play. The survey suggested several strategic steps for policymakers: improving the adequacy of state pension systems; encouraging or requiring workers to save more for their own retirement; establishing more robust floors of old-age poverty protection; and raising retirement ages and encouraging longer work lives.
   Mr Donald Kanak, Chairman of Prudential Corporation Asia said: “Rapid ageing in Asia is an irreversible trend and poses many challenges for today’s societies. Closing the growing gap in old-age protection requires public and private sector solutions. The insurance and asset management sectors can play a critical role that relieves pressure on government budgets as societies age.”
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