Not long ago, it was clear to many Singaporeans that financing their older age was growing more challenging as average life spans lengthened. A form of longevity risk—the possibility that people might outlive their financial assets—had become a prospect that working-age and older Singaporeans could not dismiss. The covid-19 crisis has further deepened the anxieties of many, negatively impacting perceptions of their financial wellbeing and denting confidence in their ability to finance longevity.
In a recent survey by Economist Impact, just 29% of Singaporeans say they feel prepared to live to the age of 100 from a financial perspective. This is slightly higher than the 26% who said the same in a similar survey we conducted in 2018. However, the 2021 figure is lower than the percentage saying they are prepared for 100 from a health perspective (31%). It is also a reversal from 2018 in that financial confidence then outstripped confidence about health.
The pandemic cloud may have a silver lining, however, if it leads Singaporeans to think more carefully about their long-term financial strategies. Experts we interviewed for this article see indications that this is occurring. Below we examine how the pandemic has affected Singaporeans’ financial readiness for longevity.
A deterioration in people’s financial situations is apparent in several responses to our 2021 survey:
“The current environment, with low interest rates, price increases for food products and rentals, and broader concerns about inflation would negatively impact most people’s ability to sustain an ongoing savings plan,” says Susan Soh, chairman of the Investment Management Association of Singapore (IMAS) and co-head of Asia-Pacific at Schroders, an asset management firm.
The pandemic appears to have led some Singaporeans to adjust their personal financial strategies. For example, Ms Soh says that her teams have observed higher activity and volumes on online wealth platforms in the past 18 months. According to Lim Sia Hoe, executive director of the Centre for Seniors, an advocacy and support organisation for seniors, some older Singaporeans have waded into online share trading during the pandemic, and many have taken steps to top up their Central Provident Fund (CPF) retirement savings.
Ms Soh has also seen changes in personal investment strategies in the past year among people of all age groups. More people, she
says, have been actively managing their portfolios and diversifying their holdings as a de-risking strategy amidst share market turbulence. Investors approaching retirement have been particularly keen to de-risk, she says, as they are reluctant to tap into their retirement savings.
These developments encourage Ms Soh to believe that the crisis has increased awareness among citizens of the opportunities, as well as risks, of investing, and more broadly of the need for diversified financial strategies. “’Black swan’ events such as these often lead people to adopt more resilient and disciplined
investment strategies,” she says. “People of different ages are more ready now to accept some risk to enhance their long-term returns.”
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