ABOUT THE RESEARCH
Saving for 100: Funding longevity in a time of uncertainty is an Economist Intelligence Unit report, commissioned by Prudential Singapore. It explores the financial challenges Singaporeans face as life expectancy rises and how they plan to manage their wealth in anticipation of living a longer life. It also considers the implications of the covid-19 crisis for people’s ability to save for longevity. The analysis is based on a survey of 1,219 Singapore residents conducted in February and March 2020.
The effects of the covid-19 crisis gripping the world in 2020 will be felt by societies long after the virus is conquered. The toll in human lives has already been horrific, and some virus survivors could face long-term health issues. The impact on economies, including Singapore’s, has also been grim, with negative knock-on effects on employment and incomes. Against this post-covid-19 backdrop, Singaporeans of all generations could be ustified in wondering about their longterm financial prospects. The population’s long average life span ought to be seen as a blessing, but not all citizens may view it that way if their personal finances are in doubt.
As the crisis unfolded, we surveyed over 1,200 residents of the city-state to understand their hopes, worries and plans for financing their older age as many look forward to living into their 80s, 90s and even beyond.1 Over half (56%) of respondents expressed confidence that they have already saved, or will be able to save, enough to support living until they die. That, however, leaves 44% who think otherwise, and the majority’s confidence is likely to have been dented as the crisis has deepened. There are already real concerns evident in the survey, particularly among millennial-age Singaporeans, that financing older age will grow increasingly tough.
Millennials prepare for a financial squeeze. Singaporeans aged 25 to 34 face the toughest challenges among today’s working-age population in financing their older age. More millennials (21%) than in the sample as a whole (17%) expect to live 90 years or longer, and they are developing multiple income sources to fund it. They are also planning to save to support their ageing parents, but only 30% expect their children to do the same for them. This is not surprising given the ongoing decline in the size of Singaporean households, which means there will be fewer siblings to bear such costs.
Diversification is the order of the day. There is recognition among Singaporeans of the need to diversify income sources well before reaching retirement age. Besides the Central Provident Fund (CPF), which 79% of respondents are relying on to help fund older age, bank savings, life insurance, health insurance and share investments feature in the financial plans of most respondents. Many (28%) are also creating income streams from real estate. The crisis shock, say experts interviewed for the report, underscores the even greater need to develop multiple sources of income.
Attitudes towards risk are loosening. Millennials are more tolerant of risk in their financial strategies than older generations. Among the former, 72% (compared with 66% overall, and 58% among the oldest group in the survey—55-65 year-olds) say they will need to invest more of their savings to ensure funding a longer life. And 60% of millennials (compared with 57% overall) include investing in shares and other exchange-traded securities in their strategies.
Savers and investors have options to expand their portfolios. Over half (59%) of respondents claim to have a financial plan in place to save for their older age. Such plans may include a variety of methods, but the experts we interviewed say Singaporeans can do more to maximise their savings. One method is topping up their CPF account and leaving it to work after 55 rather than withdrawing from it. Another is by including higher-yield assets, such as blue chip stocks and investment grade bonds, to complement lower-yield ones (for example, government bonds) in their saving portfolios.
Evolving lifestyles could impact retirement financing. Millennials, more so than older groups (52% versus 47% overall), plan to take several career breaks amidst the traditional life-stages of work, education and retirement. Most millennials also expect to have three or more occupations during their working lives. And 53% believe it impractical to have more than one child, which helps explain why most do not expect their offspring to support them in older age.
1. Living, studying and working longer
Singaporeans have one of the highest life expectancies in the world thanks to the island’s continued improvement in public health and in the standard of living enjoyed by residents.2 Accordingly, most of our survey respondents expect to live long lives—57% to 80 years of age or beyond and 17% to 90 or beyond. Among millennials—the youngest age cohort (25-34) in our sample—21% believe they will live into their 90s or longer.
As Singaporeans live longer, assumptions they may have held about the traditional, sequential progression of life stages— education followed by work followed by retirement—no longer hold sway. According to Dawn Cher, a financial blogger known as “Budget Babe”: “The traditional assumptions won’t disappear overnight, but the separate life stages are increasingly blending together.” The largest share of respondents in the survey—47%—expect those life stages to be interspersed with multiple career breaks taken for different purposes (which might involve study, retraining, travel, caring for family or other purposes). More millennial respondents (52%) have this expectation, and more women have it than men (49% versus 44%).
Lifestyles are also changing as people are making major life choices later than their parents. This includes starting a full-time career, getting married, having children, purchasing a home and retiring. Over half of millennials–53%–think it’s impractical to have more than one child. This figure is higher than those of the older age groups (47% of 35- 44 year-olds; 46% of 45-54 year-olds; and 42% of 55-65 year-olds).
See the world, study and put off retirement
Younger Singaporeans are clearly keen on the idea of taking multiple career breaks. Nearly 60% of millennials in the survey (compared with 43% overall) plan to voluntarily take multiple breaks, even if they’ve had one already. Among this group and the overall sample, travel is the main purpose, although the border restrictions that governments have put in place to deal with the pandemic are likely to limit travel ambitions in the near term and possibly longer if visa regimes are tightened. Caring for family is another major reason for taking breaks (particularly among women).
Considerably more millennials than the wider group plan to use their breaks for study and skills training, mostly with an eye to changing their occupations. Of the youngest cohort, 28% expect to have three occupations during their lifetime and 27% expect to have four or even more.
“Due to disruptive technology change and how the marketplace is shifting, people are realising that they need to go back to school to upgrade their skill sets,” says Sumit Agarwal, Low Tuck Kwong distinguished professor of finance at the National University of Singapore Business School. “The government is nudging them in this direction,” he adds, a reference to its heavily subsidised SkillsFuture programme and other lifelong learning initiatives. Over 6 in 10 respondents (62%, and 65% of millennials) believe generations after theirs will be taking courses continuously until the end of their working lives.
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