Report recommends couples efficiently mobilise household wealth as a key strategy for meeting financial needs over a likely longer-than-expected retirement.
Bangkok – Manulife Asset Management today issued a report that finds many married couples in Asia, including in Thailand, are significantly underestimating the length of time they will spend in retirement and, as a result, are likely not accumulating sufficient retirement savings.
The report, entitled Live long and prosper? Retirement and longevity risk, is the fifth in Manulife Asset Management’s Aging Asia series. It provides retirement duration forecasts and assessments of longevity risk, the risk that a retiree will outlive his or her sources of income, for married couples in 10 Asian economies: China, Hong Kong, Indonesia, Japan, Malaysia, the Philippines, Singapore, South Korea, Thailand and Vietnam.
Michael Dommermuth, President, International Asset Management, Manulife Asset Management, explained: “We feel that marital status in particular is too often ignored in retirement planning. The vast majority of Thais continue to enter retirement as part of a married couple and thus should factor in the likelihood of one partner, usually the wife due to longer life expectancy for women, outliving the other. Not factoring in the potentially significantly longer life expectancy of a partner can increase the potential that they will outlive their retirement savings.”
Tor Indhavivadhana, CEO of Manulife Asset Management (Thailand), explained: “The report finds that married couples in Thailand face average joint retirement of 30.2 years, which represents a generally ‘higher’ degree of longevity risk relative to their peers across Asia. This is in part because Thais retire relatively early, as a large portion of private and public sector employees are subject to mandatory retirement at age 60.
“However, the level of longevity risk is in flux in many of the markets studied as we find a relatively high 66% correlation between a country or territory’s per-capita GDP and its average life expectancy. Therefore, life expectancy and longevity risk could actually increase in Thailand going forward as the country is forecast to see strong economic growth and rising per capita incomes for many years to come.”
Dommermuth added:“It is important to realise that any given individual has a 50% chance of living longer than the average forecast period. Our research indicates that in Thailand the chances of outliving retirement savings can be substantially reduced if married couples either delay retirement or factor an additional 7 to 11 years into their financial planning.”
Policymakers in the region are already taking steps to reduce longevity risk for their citizens. Many governments have raised their official retirement ages and this avenue is open to Thailand as well. That being said, the Aging Asia research series has shown that responsibility for retirement income security is increasingly shifting to individuals and that effective deployment of household wealth would reduce the chances of outliving retirement savings by delivering the potential for returns in excess of bank deposit rates.
Indhavivadhana expanded on this: “As a financial service provider, Manulife Asset Management (Thailand) is doing its part to help mobilise household wealth and maximise returns potential.For example, we offer a variety of equity and fixed income pooled investment funds that give investors access to diversified portfolios of domestic or overseas securities.
“Given current volatility in Thai markets, we feel that investors should consider supplementing their domestic investments with exposure to foreign markets. Investors can choose funds which meet their individual risk tolerance levels and their investment goals, which may be achieving capital gains to maximize retirement savings or supplementing other sources of household income via the potential for regular dividend payouts.”
Manulife Asset Management’s Aging Asia series of reports and related resources can be accessed at: www.manulifeam.com/agingasia.
Notes to editors
The retirement duration figures quoted in this release and in the report, Live long and prosper? Retirement and longevity risk, are based on Manulife Asset Management’s Asia Retirement Duration Model (ARDM). ARDM produces a full lifecycle view of retirement duration from the initial stage as a married couple through the transition to a sole survivor. ARDM has three key inputs:
- Retirement age – official retirement ages remain relatively low across most of Asia even as life expectancy is increasing, extending the period of time individuals spend in retirement.
- Life expectancy – Asia is home to some of the longest lived populations in the world following rapid increases in life expectancy in the region over the past few decades. Longer life spans translate directly into extended retirement duration and hence contribute significantly to longevity risk.
- Marital status – Most couples in Asia enter retirement as part of a married couple, meaning that their retirement planning should be based on joint rather than single life expectancy as one partner – usually the wife – is likely to outlive the other, potentially by a significant margin.
About Manulife Asset Management (Thailand)
Manulife Asset Management (Thailand) Co., Ltd. (Manulife AM (Thailand)) is a subsidiary of Manulife Financial, a leading Canada-based financial services group. As a part of a global investment organization with fund analysts and investment professionals around the world and in 10 countries and territories throughout Asia, the company is fully supported by and interconnected with Manulife Asset Management’s global team. Manulife AM (Thailand) is one of only a few asset management companies in Thailand that has expertise in offshore fund management, which is a core strength.
About Manulife Asset Management
Manulife Asset Management is the global asset management arm of Manulife Financial, providing comprehensive asset management solutions for institutional investors and investment funds in key markets around the world. This investment expertise extends across a broad range of public and private asset classes, as well as asset allocation solutions. As at 31 March 2014, assets under management for Manulife Asset Management were US$269 billion. Manulife Asset Management’s public markets units have investment expertise across a broad range of asset classes including public equity and fixed income, and asset allocation strategies. Offices with full investment capabilities are located in the United States, Canada, the United Kingdom, Japan, Hong Kong, Singapore, Taiwan, Indonesia, Thailand, Vietnam, Malaysia, and the Philippines. In addition, Manulife Asset Management has a joint venture asset management business in China, Manulife TEDA. The public markets units of Manulife Asset Management also provide investment management services to affiliates’ retail clients through product offerings of Manulife and John Hancock. John Hancock Asset Management and Declaration Management and Research are units of Manulife Asset Management. Additional information about Manulife Asset Management may be found at ManulifeAM.com.
Manulife is a leading Canada-based financial services group with principal operations in Asia, Canada and the United States. Clients look to Manulife for strong, reliable, trustworthy and forward-thinking solutions for their most significant financial decisions. Our international network of employees, agents and distribution partners offers financial protection and wealth management products and services to millions of clients. We also provide asset management services to institutional customers. Funds under management by Manulife and its subsidiaries were approximately US$574 billion as at 31 March 2014. Our group of companies operates as Manulife in Canada and Asia and primarily as John Hancock in the United States. Manulife Financial Corporation trades as ‘MFC’ on the TSX, NYSE and PSE, and under ‘945’ on the SEHK. Manulife can be found on the Internet at manulife.com.
 Based on per-capita GDP at purchasing power parity (PPP); International Monetary Fund, World Health Organisation, 2011.
IMF World Economic Database, April 2014.