Wealth Solutions & Wealth Planning

St. James’s Place reveals that More than half of Hong Kongers expect family to care for them in retirement

Amid declining birth rates and an aging population, a new survey by St. James’s Place Wealth Management Asia (SJP Asia) reveals that more than half (51%) of Hong Kongers expect their family to care for them in retirement.

The survey also reveals that more than half (53%) of respondents forecast they will not have enough money saved to sustain the lifestyle they want in retirement. Almost one-in-eight (12%) believe they will need to work past retirement age owing to a lack of savings, with almost two-thirds (65%) concerned about being a financial burden to those closest to them, the firm revealed in a press release.

These findings highlight the growing challenges that Hong Kong families face as they age and also underscores the importance of robust financial planning for millennials, the first generation that will reportedly earn less than their parents.

Preparing for sacrifices

More than a third (37%) are unaware of how much income they will require in retirement to enjoy the lifestyle they aspire to lead. The median expectation among respondents was a monthly income of HK$35,001 – HK$40,000 (17%), with almost a third (30%) believing they would need more than HK$40,000 per month in their retirement.

Some of their concerns include having a lack of understanding around tax matters and having to make lifestyle sacrifices that all contribute to making retirement planning difficult, with more than half (56%) saying that it was a significant source of stress in their lives. However stressful, a lack of financial preparation earlier in their lives can lead to more serious consequences nearer to their retirement - less than half (43%) of respondents have discussed retirement with their family members.

Considering forecasted savings shortages, many respondents are prepared to make sacrifices in their twilight years to accommodate their retirement plans. This includes reducing spend on lifestyle services, luxury goods and travel, downsizing their home (18%), and reducing spending on family members (21%).

Half (50%) of those surveyed say they plan to retire outside of Hong Kong, with Taiwan (23%), Japan (15%) and Mainland China (14%) being the most popular destinations. When asked why, 55% cited the high cost of living. However, respondents were also motivated by positive factors including a desire for a change in scenery (52%) and better perceived benefits for seniors elsewhere (42%).

With Hong Kong notorious for having some of the highest property prices in the world, adequate wealth management is important to ensuring the long-term standards of living for residents.

Matthew Deeprose, Head of Business, St. James’s Place Hong Kong, said: “Hong Kong is often cited as one of the most expensive cities in the world and this will have significant impact on the lives of Hong Kongers as they plan for their retirement. Without adequate financial planning and saving, Hong Kongers will have to prepare to make many sacrifices in their twilight years, both financially but also emotionally.”

Start early, start young

Interestingly, more than half (52%) of those who do not believe that they will have enough money saved for retirement, are between the ages of 25 to 40. However, these are respondents with a larger time horizon and more earnings potential, which means they can do more to improve their financial situation over time.

The report also finds that life insurance uptake is very high at 85%, but only 16% have made a will. This was more concerning when examining the breakdown of the respondents by age. While it is understandable that 52% of respondents that do not have a will are under the age of 40, almost two-thirds (64%) of those who do not have life insurance are under the age of 40. Insurance premiums are often much lower when the insured are younger and have fewer health complications, and their benefits are only fully utilised through a significant time horizon. A lack of a will or inadequate estate planning can also have serious financial and legal ramifications for many families in Hong Kong, in addition to risks of potential family discord.

“Covid-19 has placed unprecedented pressure on the livelihoods, finances and wellbeing of Hong Kongers. What the disease has shown starkly, is that people need to think very carefully about financial protection and estate planning as a potential crisis is never far away. By starting the financial planning process today, Hong Kongers can protect themselves and provide for their loved ones, helping to mitigate any costly and long-lasting consequences,” said Deeprose.

Generational wealth

When looking at generational wealth transfer, some worrying trends were revealed. Almost two-thirds (63%) have not made plans to transfer wealth and assets to their family, with less than a fifth (19%) intending to do this over the next five to ten years. A third (33%) of respondents say they plan to donate a part of their wealth/estate to a philanthropic cause.

Major concerns around generational wealth are a lack of understanding of intergenerational wealth transfer (50%) and tax implications (49%). Respondents also cited the difficulty in dividing wealth among family members (43%), with almost one third (32%) worrying that this could cause disharmony among family members and 26% expressing concern that the next generation will not manage or growth family wealth responsibly.

St. James’s Place Wealth Management is a leading wealth management group, with offices across the UK, and internationally in Singapore, Hong Kong and China. Through its dedicated network of financial advisers – the Partnership – the business provides face-to-face wealth management advice to individuals, businesses and trusts based on their personal needs and circumstances.