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It’s paycheque to pension, as Hong Kong millennials plan ahead sooner than Asian peers

Many see Hong Kong millennials as living from paycheque to paycheque and not committing to a long-term plan – but they actually lead their Asian peers in retirement planning, according to new research from BlackRock, the world’s biggest asset manager.

Four out of five Hong Kong millennials (aged between 25 to 35) have already started preparing for retirement, the highest ratio across Asia-Pacific, with a majority of them betting their financial future on buying stocks, the study shows.

The young Hongkongers’ high proclivity for retirement savings is against the backdrop of notoriously high living costs in the city and escalating global economic uncertainties, noted the report, which polled 28,000 investors across the world.

“These findings are contrary to the common view that the city’s millennials would rather splurge on holidays and nice food than save for their long-term future,” said Julia Lee, BlackRock’s head of Hong Kong retail business.

The study found that 81 per cent of Hongkongers aged between 25 to 35 said they had already begun retirement planning, compared with 69 per cent for their Asia-Pacific peers.

They are also much more likely to take risks, with more than two thirds pouring money into equities in their investment portfolios, whereas only 42 per cent of their regional counterparts would do the same.

Hong Kong runs a Mandatory Provident Fund (the MPF), a compulsory pension fund for residents with employees and employers required to contribute monthly.

“The MPF scheme is good, while we also see local people’s need to achieve good returns from their personal financial investments,” Damien Mooney, BlackRock’s head of retail business for Asia-Pacific, said.

Hongkongers have the world’s longest life expectancy, thanks to low smoking rates, with the average lifespan for women 87 years, and men 81 years, according to data released by Japan’s health and welfare ministry.

The average retirement age is 58, meaning residents can be faced with over two decades relying on their savings, in what consistently ranks as one of the world’s most expensive cities to live.

The BlackRock figures showed 86 per cent of Hong Kong investors, aged between 26-74, had managed to set money aside for retirement, and more are reducing their exposure to cash in the low interest rate environment. In spite of their high awareness, fewer than a half said they were confident in achieving their expected retirement income.

The MPF delivered its best first-quarter results this year since 2013 with an average gain of 5.89 per cent, but it still lost out to pure stock market investment. For the same period, Hong Kong’s benchmark Hang Seng Index rose 10 per cent.

That might help to explain why 49 per cent of Hong Kong investors polled by BlackRock said they preferred to buy dividend-bearing stocks, the most favourable asset class over real estate, government bonds and funds.

When making investment decisions, the majority still rely on advice from online sources, including social media and websites of brokers and asset managers, instead of professional financial advisors that usually come with much higher charges.

SCMP Hong Kong

29th June 2017

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