New Retirement Preparedness Indicator highlights financial and economic factors influencing retirement readiness in Thailand

Research reveals Thailand currently has generally favourable conditions for retirement funding though it needs to work on translating continued economic growth into long-term private retirement savings Bangkok - Manulife Asset Management this week issued a report that introduces its Retirement Preparedness Indicator, which highlights the financial and economic conditions influencing the ability of individual economies to provision for their aging populations. The report finds that Thailand has many factors working in its favour in terms of providing financially for its retirees, but needs to take steps to enable individuals to shoulder some of the responsibility for retirement saving. The report, entitled Funding the golden years: The financial and economic factors shaping retirement provision for Asia’s rapidly aging populations, is part of Manulife Asset Management’s Aging Asia research series and builds on the findings of its June 2012 publication: Saving up: The changing shape of retirement funding in a greying ASEAN. The previous publication revealed how ASEAN countries once considered to be among the most ‘youthful’ in Asia are actually aging more rapidly than most realise. The new report divides the subject countries and territories into three broad categories of retirement preparedness. Those deemed to be facing the ‘most favourable conditions’ are Taiwan, Hong Kong and Japan; those judged to have ‘favourable conditions’ are Singapore, China, Malaysia and Thailand and those considered to be facing ‘challenging conditions’ are Indonesia, South Korea, Vietnam and the Philippines. Tor Indhavivadha, CEO of Manulife Asset Management Thailand, explained the factors that place Thailand in the group facing ‘favourable conditions’: “Thailand has enjoyed strong economic growth in recent years and this trend is expected to continue going forward. This robust economic expansion has helped the nation build a government-mandated pension scheme with impressive net pension wealth and should deliver higher per capita GDP going forward. However, the country’s retirement preparedness is somewhat compromised by the state pension scheme’s low coverage rate, which creates a significant preparedness divide between those who are covered and those who are not. In addition, although continued economic growth should increase its currently low level of financial wealth, Thailand has to improve its level of financial sector access so that higher incomes can be channelled into long-term personal retirement savings.” Oscar Gonzalez, economist at Manulife Asset Management, expanded on Indhavivadha’s comment, pointing out that: “Thailand’s government-mandated pension plan comprises enviable net pension wealth of 9.1 times average annual incomes, but covers only 21% of the population. Thus, a significant portion of Thailand’s aging populace is left without a state-provided pension safety net. However, with projected GDP per capita growth of 3.9% per annum through 2050, the nation should see significant growth in income levels that can potentially enable individuals to contribute to financing their own retirements if appropriate savings vehicles are available.” Michael Dommermuth, president of Manulife Asset Management Asia, commented on the report’s conclusions: “Asia as a whole is aging much more rapidly than most realise and individual countries and territories face varying conditions that affect their abilities to provide for their growing retired populations. The report reveals that most public retirement schemes in the region will need to be supplemented and that the ability to do so hinges on the availability of secure savings vehicles that unlock the potential to grow personal savings. This is strongly influenced by government policy support for enhancing financial market depth and the level of private sector interest in alternative savings mechanisms such as mutual funds and investment-linked insurance products.” The report points out that Asia is likely to experience an increased shift in responsibility for retirement funding from the state to the individual, and that Thailand is no exception to this trend. As this shift takes place, Dommermuth anticipates a growing need for investment products such as asset allocation funds that help build pension pots and, ultimately, income generating products that generate steady cash flow in retirement. Dommermuth concluded: “Manulife Asset Management has considerable experience building multi-asset solutions designed to meet specific client objectives and constraints. Our dedicated asset management unit, the Portfolio Solutions Group, has investment professionals across the U.S., Canada and Asia managing more than US$90 billion in asset allocation funds, making us one of the world’s leading asset management firms. Based on market knowledge gleaned from our footprint across 10 countries and territories in Asia, we know how to provide customised investment solutions that meet local market needs for retirement funding. This is why Manulife Asset Management Thailand provides diversified mutual funds designed to empower individuals to prepare for retirement. These offerings include foreign investment funds that provide exposure to markets beyond the home market."-NT-

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