Battling The Age-Old Problem: Retirement Challenges And The Diverse Asian Workforce

OVERVIEW

Asia is getting older. Thirty years ago, the average life expectancy in the region was 60 years – now it’s 75. In Japan, the average life expectancy goes up to over 84 years. This longer life expectancy, lack of traditional pension schemes, and underfunded retirement plans mean saving for retirement today is a significant challenge.

Asia also presents an interesting conundrum as the region has been going through a historically unprecedented demographic change. In markets such as China, Hong Kong, Japan, Singapore, South Korea, and Taiwan, it will take just 10 years for 28 percent of the population to be 60 years and above. In contrast, the U.S and U.K. will take around 80 years to reach these thresholds.

Coupled with increased longevity, as people are forced to make more immediate trade-offs, such as student loans, childcare costs, rental and mortgage, the savings gap widens. Yet, while Asia’s population is rapidly aging, the region is also home to some of the largest millennial populations of today – a generation that grew up in the age of technology.

IN DEPTH

Chinese millennials alone outnumber the entire population of the U.S (328 million), according to the UN Population Division. This trend is set to increase, with half of the population of Asia Pacific falling in this age bracket by 2020.

The region’s younger workforce poses a unique set of challenges for employers, as their retirement adequacy outlook is gloomier than for workers later in their careers. In fact, according to the Aon’s The Real Deal study, the younger an employee is, the later their retirement age will likely have to be because of the rising life expectancy – which is true in the U.S., as well as Asia.

“Today’s 30-year-old workers will have to save more to meet their retirement costs than their 60-year-old co-workers,” says Lucy Liu, head of Aon’s Health and Benefits practice in China.

Yet, less than half of China’s millennial population has begun to save for retirement. In Japan, over half of those who want to work beyond 65 cited economic reasons, with a quarter worrying that they will not be able to cover their living costs unless they work. The situation in India is no different, with only one in three people saving for retirement.

Changing Mindsets and Focusing on Financial Wellbeing

Employers need to be cognizant that workers of different generations and genders might have different savings considerations. For example, while younger workers might be focused on saving for their next holiday, middle-aged workers might be concentrating on putting aside savings for their children’s university educations.

“The savings gap is indeed different according to the income, gender, generation, and industry of the employee and it bodes well for employers to analyze their workers’ retirement adequacy – or overall financial wellbeing – and enable a personalized approach for addressing it,” says Aon’s Shikha Gaur, executive director, Retirement and Wealth Management, Singapore.

The most effective approach to the retirement savings conundrum is to change individuals’ behaviors to both money and savings, by not only encouraging smart habits but making them a key part of one’s lifestyle – such as moving from extrinsic motivation consisting of rewards and incentives to an intrinsic one making the task at hand enjoyable.

“Employers can provide additional retirement savings education and tools as part of a holistic financial wellbeing program to employees, allowing them to stay informed and to take control,” says Aon’s Ashley Palmer, regional practice leader, Retirement Solutions, Asia. “This will in turn relieve employees of a significant burden in the knowledge that they are on-track towards their retirement goals, and therefore, positively impact productivity.”

Encouraging Better Savings through Mobile

Across Asia Pacific, most aspects of day-to-day life are done via a mobile device. Hong Kong, Singapore, South Korea, Taiwan, and Malaysia are all mobile-first markets and young people aged 18 to 29 are the most avid smartphone users.

The potential of motivating people to use their mobiles to improve their finances can be seen in the make-up of the gamer, e-sports and influencer demographic: Women make up about half of the group and are predicted to surpass the number of men as gamers by 2020. Plus, over 75 percent of women gamers play on their mobile phones with 60 percent playing on tablets.

The large number of young people in Asia’s workforce, coupled with the surge in the region’s mobile phone usage and a strong female presence in the mobile gaming space presents a unique opportunity for employers looking to develop creative financial wellbeing solutions to help talent prepare for their retirement from today.

“A logical next step is the rise of mobile financial wellbeing solutions to reach large and geographically disperse workforces across Asia to help solve the broader retirement-saving challenge,” says Palmer.

For instance, the Indexed Annuity Leadership Council (IALC), a consortium of life insurance companies in the U.S., launched the online game, Master of Retirement, in October 2017. By answering multiple-choice questions, players can find out if they’re a novice or an expert when it comes to having and growing a nest egg.

Closer to home in Asia, apps such as Seedly allow for expense tracking and other personal finance matters via mobile. Banks are getting in on the trend too. For example, DBS bank launched Singapore’s first holistic digital financial advisor “Your Financial GPS” in 2018. Customers can check their spending across multiple expense categories, set and track budgets, and make use of insights and financial advice to better manage their finances using the digital financial advisor via DBS/POSB iBanking and digibank apps.

Palmer believes there isn’t a single answer to solving the retirement savings challenge. “Understanding emerging approaches is a first step in addressing aspects of the retirement savings challenge,” he says. “Some technology solutions are clearly framed around the distribution of their own-brand financial products, but to truly overcome the challenges that come with longevity and the varied needs of a diverse workforce, organizations should maximize the benefits technology can deliver by optimizing the wealth of workforce data and insights now available to them – and know about their employees’ needs as well as they would know their customers.”