MassMutual Asia announces key retirement survey findings:
•Inflation/Insufficient savings, health problems and unemployment
•Record low confidence level in living the dream retirement life

September 9, 2016 Hong Kong

In the third quarter this year, MassMutual Asia Ltd. (MassMutual Asia) specially commissioned a telephone survey by the Public Opinion Programme of the University of Hong Kong in order to understand the retirement dreams of Hong Kong people and the way they plan for retirement.

The findings revealed that some 90% of Hong Kong people have specific retirement dreams. Their top five dreams were: “a worry-free retirement” (58%), “traveling around the world” (26%), “good health” (16%), “owning own home and car” (5%), and “having abundant wealth” (5%). However, respondents’ confidence level in realizing their dream retirement life hit a record low, at 5.4 out of 10, lower than the 6.1 rating in 2012 and 5.5 in 2014. In addition, the results revealed that Hong Kong people’s top five retirement worries were: “inflation/insufficient savings” (55%), “health problems” (48%), “unemployment” (43%), “uncertainty about the future” (40%), and “unexpectedly long lifespan” (18%).

The results indicated that respondents would need an average monthly retirement income of HK$12,3001, and $4.09 million during the course of retirement. The main source of funds to support their retirement were: savings (70%), MPF/pension (24%), investment returns (16%), support from their own children (11%), and the old-age allowance (8%).

The survey also calculated the actual retirement funds needed by each of the respondents based on their expected retirement age and monthly retirement budget, and then compared this amount with their projected retirement funds. The results indicated that not only had some 70% of respondents underestimated the funds they would actually require for retirement, but also that 30% of respondents had seriously underestimated this, with their projected retirement savings amounting to a mere 50% or even less of the actual amount required.

According to the findings, 43% of respondents considered retiring in places other than Hong Kong, with 40% of them choosing to move to mainland China or Taiwan on retirement. With inflation naturally eroding their purchasing power over time, many respondents gave more consideration to spending their retirement life in places where the “standard of living and property prices” (28%) is lower and the “living habits” (18%) more agreeable. Other selection criteria for retirement places included “living and natural environment” (28%) and “social stability” (17%).

Hong Kong people now expect to retire at an average age of 60.5, i.e., 1.5 years later than that in the 2014 survey. However, figures from the Hong Kong Census and Statistics Department show that the labor force participation rate falls dramatically from the age of 55 onwards. With longevity steadily increasing over the past 20 years, life expectancy at birth for males in 2064 will be 87 years and for females will be 92.52. Financing an unexpectedly long retirement is a great challenge for Hong Kong people. In this increasingly competitive market environment, some people will have to face “involuntary retirement” as early as their middle age. As a result, they will lose their main source of income.

The survey also studied the respondents’ risk management in terms of health. Around 53% of respondents worried about contracting a critical illness, with cancer being at the top of the list, however, only half of respondents are insured against critical illness. Overall, more than 80% of respondents had a sum insured of only HK$500,000 or less, or had “no critical illness cover”. This indicated that Hong Kong people’s awareness of risk management remains low. As a matter of fact, critical illness medical treatment and medication costs can nowadays amount to millions of dollars, which would represent a major financial burden for people especially after retirement.

Ms Jeanne Sau, Senior Vice President & Chief Marketing Officer, MassMutual Asia, said, “Mapping out one’s retirement with an annuity plan that offers a guaranteed lifetime annuity payout as the core income component is instrumental in securing sustainable retirement funds, effectively hedges against the risk of ‘living too long’ and avoids hitting the retirement tipping point.” Ms Sau recommends that Hong Kong people consider the “Multi-pillar Retirement System” advocated by the World Bank, in which a “voluntary annuity” is a major pillar, and that the annuity income should amount to at least 30% of the total retirement funds required to support basic needs during the course of retirement.

Currently there are two types of annuity plan in the market: the “genuine” annuity that provides the insured with lifetime annuity income, without any pre-set period; and one that usually provides the insured with pre-set installment payments for a 10- or 20-year period, based on the accumulated value of the policy. As the latter provides no guarantee of lifetime income, it may not adequately cover the risk of prolonged life expectancy.

Ms Sau continued, “A well-thought-out retirement plan should also be well covered by risk management. Having comprehensive health and medical cover in place can help shoulder the “involuntary expenses” entailed when contracting a critical illness. To ensure a worry-free retirement, it would be advisable to manage these risks by taking out a comprehensive, refundable critical-illness protection plan, plus a cancer protection plan.”

MassMutual Asia Ltd. is a member of the MassMutual Financial Group. Headquartered in Hong Kong, MassMutual Asia has some 2,800 consultants. The company delivers professional one-stop risk- and wealth-management consulting services, including a series of flexible and innovative life insurance products, retirement plans, and investment services. Besides the life insurance business, MassMutual Asia also operates several subsidiaries in Hong Kong, including MassMutual Trustees Ltd., which focuses on MPF, and MassMutual Insurance Consultants Ltd., which handles general insurance.

MassMutual Financial Group is a marketing designation for the Massachusetts Mutual Life Insurance Company (MassMutual) and its affiliates. With US$642 billion3 in assets under management and 13 million customers, MassMutual Financial Group is a global, growth-oriented and diversified financial-services organization. Established in 1851, MassMutual enjoys exceptionally high financial ratings from major ratings agencies, including A.M. Best Company "A++" (Superior; top category of 15), Fitch Ratings "AA+" (Very Strong; second category of 21) and Standard & Poor's "AA+" rating (Very Strong; second category of 21)4 and is ranked by FORTUNE as one of the “Five Largest US Life Insurance Companies”5 and “FORTUNE World’s Most Admired Companies”6.

1. The figure is rounded to the nearest hundred.
2. “Hong Kong Population Projections 2015-2064” published by The Hong Kong Census and Statistics Department.
3. Figure as of December 31, 2015.
4. Ratings apply to Massachusetts Mutual Life Insurance Company and its subsidiaries, C.M. Life Insurance Company and MML Bay State Life Insurance Company. Ratings are as of September 1, 2016 and are subject to change.
5. Ranked according to the aggregate results of [Insurance: Life, Health (Mutual)] and [Insurance: Life, Health (Stock)] on the total revenues for 2015, based on the FORTUNE 500 as published on June 15, 2016.
6. Ranked according to the results in “Life and Health Insurance” category in the 2014 FORTUNE World’s Most Admired Companies survey. The survey assessed nine reputation drivers considered to be crucial to a company’s global success: financial soundness, long-term investment value, people management, social responsibility, use of assets, quality of management, quality of products/services, innovation and global competiveness.

Ms Jeanne Sau, Senior Vice President & Chief Marketing Officer, MassMutual Asia announces key retirement survey results.