With advances in medicine and technology, global life expectancy has increased by more than 10 years in the past four decades.
But can we afford to live longer?
We often hear that retirees need to have at least 70 percent of their working-age income to enjoy a comfortable retirement.
Those with investment face declining rates of return and state pension programs are under increasing pressure to maintain financial sustainability.
A ranking of pension plans in 49 countries shows this trend.
Holland, Denmark and Norway are high on the list, followed by Switzerland, Japan and the United States.
The balanced multi-pillar approach in these countries provides retirees enough cushion.
Eastern European countries have reformed their pension system, including collecting defined contribution to support compulsory pension plans.
But most Asian countries are at the bottom of the list.
While emerging economies are expanding fast, their pension systems are unable to keep pace.
Many of these countries started their pension systems only in recent years and are now facing serious retirement-related issues.
Taiwan, mainland China, India and Thailand were found to have the most severe problems.
Their public pension funds cannot afford to pay long-term retirement benefits.
Wealth decumulation plans are more complicated than wealth accumulation programs.
For related businesses, these present both challenges and opportunities.
There will be demand for such financial products to help people arrange their retirement but these are not for everyone.
That’s because individual retirees have different circumstances.
High net worth individuals may demand a return rate from their providers that can to support their present lifestyle.
Middle-income families need to plan early and well to save enough money for their graying years.
Hong Kong’s Mandatory Provident Fund has undertaken reform in response to these challenges.
For example, it now allows people to withdraw their MPF entitlement in several batches, offering them more flexibility.
This article appeared in the Hong Kong Economic Journal on March 18.
Translation by Myssie You
[Chinese version 中文版]
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