Filipino investors ‘optimistic’ on gov’t pensions

MANILA, Philippines – Majority of Filipino investors are satisfied with their government pensions – but that sentiment is based on specific assumptions and a cash-dominant approach to retirement.

The latest Manulife Investor Sentiment Index showed that 2/3 of respondents said they are confident that their government pensions would be enough to meet their retirement needs – the highest level of confidence showed in all surveyed markets.

But across all surveyed markets, the proportion of confident investors was less than 40%, and as low as 1-in-10 in some markets.

Such optimism though is based on some risky assumptions, the survey showed.

First, investors expect their retirement income to be relatively high at 92% of their current income – the highest estimate among all surveyed markets. The average in Asia is 69%.

Second, they expect their retirement expenses to be relatively low, at 61% of their current income – the average in Asia is 66%.

Third, 95% said that in retirement, they expect to rely on private healthcare. In contrast, in every other market, only a minority expect to rely on private healthcare (the average in Asia is 38%).

Filipino investors have high estimates of their retirement income. Even if these turn out to be right, they may not be enough to cover their actual costs, Ryan Charland, CEO of Manulife Philippines said.

Charland added that people generally expect their retirement to be active, and that means expenses will likely be much higher than what many realize.

“Healthcare tends to cost a lot more than people expect. In Asia, healthcare costs have risen about twice the rate of inflation over the past 10 years. Of course, it’s even more expensive if you go private,” Charland said.

Your savings is not enough

Overall, the survey highlighted that Filipino investors rely heavily on their government pensions, with only one in 5 owning an additional, private pension plan.

Many expect to fall back on other, less assured, largely cash-forms of income, notably savings, which they expect to make up 37% of their retirement income. They are also relying on inheritance to make up 12% of their retirement income. Both cases showed the highest reliance of any surveyed markets.

Such cash-dominant approach to retirement is reinforced by the finding that, on receiving their pensions, Philippine investors plan to deposit nearly half into the bank, the second-highest level of all markets, versus the average in Asia of 35%.

“We know that Filipino investors like to hold cash and are among the most cash-heavy investors in Asia. The latest survey shows us they also plan to be Asia’s most cash-reliant investors when retired,” Charland said.

Charland said that keeping cash in the bank provides minimal returns, which may not even keep up with inflation.

“Their retirement optimism would have a sounder basis with a more balanced portfolio, especially given that retirement today can last 30 years or more,” Charland said.

The Manulife’s Investor Sentiment Index in Asia results is based on 500 online interviews in each market of Hong Kong, China, Taiwan, Japan, and Singapore. In Malaysia, Indonesia and the Philippines, the survey is conducted face-to-face. Respondents are middle-class to affluent investors, aged 25 years and above who are the primary decision maker of financial matters in their household and currently have investment products. – Rappler.com

Retired senior image from Shutterstock