Can Asia’s Aging Population Retire?

New report looks at pension savings in far east.

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Asia Stock MarketManulife Asset Management’s Retirement Preparedness Indicator has found that Taiwan, Hong Kong and Japan—which are typified by high levels of financial wealth, high state pension coverage and well-developed financial markets—have the “most favourable conditions” for retirement.

The indicator deems Indonesia, South Korea, Vietnam and the Philippines to have “challenging conditions” with regard to retirement. Except for South Korea, these countries generally have very low levels of government pension coverage, the lowest levels of financial wealth and shallow financial markets.

On the other hand, these countries are likely to see income and savings rates rise and enjoy relatively favourable demographic profiles. What differentiates South Korea from this group is that it faces the twin challenges of a rapidly growing elderly population and rapidly declining elder support ratio. However, its relatively high financial wealth and high savings rate work in its favour.

“While countries facing ‘favourable conditions’ and ‘challenging conditions’ tend to have lower levels of accumulated wealth, factors such as relatively positive economic outlooks and high savings rates work in their favour,” said Oscar Gonzalez, economist at Manulife Asset Management. “For example, China is expected to see per capita real GDP growth of 6% per annum between 2011 and 2050. Despite its demographic challenges, this robust growth, combined with an historical savings rate of 47%, implies that individuals in China are still well positioned to contribute to financing their own retirements if appropriate savings vehicles and incentives are available.”

For a copy of the report, contact bcarmichael@manulifeam.com.

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