2012 News Releases

Research suggests that South East Asia will experience a rapid acceleration in the percentage of pensioners over the next 40 years

A new report, published today by Manulife Asset Management, casts doubt on the assumption that aging populations are exclusively a challenge of already recognised ‘grey’ Asian nations such as Japan and Korea. It suggests that aging demographics are also affecting ‘youthful’ ASEAN nations making the need for the continued development of retirement funding in these countries now more pressing than ever.

The report, written by the Economist Intelligence Unit (EIU) and entitled “Saving up: The changing shape of retirement funding in a greying ASEAN”, provides an analysis of data that suggests that ASEAN countries can expect to see a tripling in the percentage of their pensioner population in less than 40 years.

The grey phenomenom is particularly acute in Singapore where, by 2050, almost a third (32%) of all Singaporeans will be over 65 – more than triple the percentage in 2010 (9%) and by far the highest percentage among the ASEAN nations.

The report examines the challenges the trend creates for pension provision in these nations. For example, in Thailand, Indonesia, Vietnam and the Philippines, fewer than one in five citizens are currently members of formally constituted pension schemes, hinting at a future where significant numbers of people may enter old age with little dedicated financial support in place.

The study concludes that the stage is set for alternative savings mechanisms, such as mutual funds and insurance products, to grow significantly in the coming years as ever greater numbers of pre-retirees seek to complement their existing formal pensions with additional savings and investments vehicles. There is evidence that this trend is already starting to take place alongside reforms to formal pension schemes in ASEAN. Manulife Asset Management expects the pace of these reforms to accelerate as ASEAN nations seek to meet the financial needs of this growing army of prospective pensioners

In ASEAN’s favour are its high savings and bank deposit rates, both of which are forecast to continue to rise in the short term. The research examines the opportunity to mobilise these into longer term investment vehicles such as life insurance and mutual funds in a bid to help individuals fund their old age. There is an important window of opportunity to do this, because savings rates are expected to then tail off as legions of pensioners raid their savings to fund their retirement.

As authorities across Asia seek to address the retirement funding needs of this growing mass of retirees, ASEAN is already seeing considerable developments in its pension systems. Manulife Asset Management expects this trend to continue.

Michael Dommermuth, President of Asia at Manulife Asset Management explains: “These findings underline the importance of reform measures being adopted by authorities in ASEAN, as they grapple with challenges such as low coverage rates, lack of indexation of benefits for inflation and comparatively low retirement ages. We are proud that Manulife has been selected as one of the providers for one such example of pension reform already being put in place in Malaysia – the Private Retirement Scheme.”

In addition to growth in savings and bank deposit rates, the report finds that comparatively sound economies and greater market liberalisation are likely to support the continued growth of savings and investment vehicles such as life insurance and mutual funds. The development of these industries in ASEAN is important as the report suggests there is scope for authorities and institutions to turn to financial institutions to provide the region’s army of aging citizens with a variety of complementary options to plan financially for retirement.

Michael Dommermuth concludes: “We believe that pension reforms will continue apace in ASEAN, underpinned by the urgency created by this rapid demographic shift. We expect to see many countries adopting a ‘multi-pillar’ approach, where individuals save for retirement through a combination of formal pension programs and private investment solutions. As this takes place, we anticipate a growing need for investment products such as asset allocation funds that help build pension pots and, ultimately, income generating products that help generate steady cashflow in retirement.”

Manulife Asset Management already has considerable experience of building multi-asset class solutions designed to meet specific client objectives and constraints, for example for Hong Kong’s Mandatory Provident Fund and other pension schemes in the region, and already manages more than USD5 billion in Asian asset allocation AUM. Its dedicated asset allocation unit, the Portfolio Solutions Group, now has investment professionals across the US, Canada and Asia managing over USD90 billion, globally, in asset allocation funds, making Manulife Asset Management one of the world’s leading asset allocation firms.

In addition, it manages a wide range of income-focused products across the region. Most recently, in Singapore, Manulife launched an investment-linked plan which invests in a balanced portfolio of Singaporean equities and bonds to provide local investors with a regular income stream. Notes to editors:

• Percentages of populations aged over 65

Source: Population Division of the Department of Economic and Social Affairs of the United Nations Secretariat World Population Prospects: The 2010 Revision

• The Private Retirement Scheme in Malaysia is a voluntary investment vehicle designed to complement the country's mandatory employee provident fund.

About Manulife Asset Management
Manulife Asset Management is the global asset management arm of Manulife Financial. Manulife Asset Management provides comprehensive asset management solutions for institutional investors and investment funds in key markets around the world. Manulife Asset Management also provides investment management services to affiliates’ retail clients through product offerings of Manulife and John Hancock. This investment expertise extends across a broad range of asset classes including equity, fixed income and alternative investments such as real estate, timber, farmland, as well as asset allocation strategies.

Manulife Asset Management has offices with full investment capabilities in the United States, Canada, the United Kingdom, Japan, Hong Kong, Singapore, Taiwan, Indonesia, Thailand, Vietnam, Malaysia, and the Philippines. In addition, it has a joint venture asset management business in China, Manulife TEDA. It also has operations in Australia, New Zealand, Brazil and Uruguay. John Hancock Asset Management, Hancock Natural Resource Group and Declaration Management and Research are units of Manulife Asset Management.

Manulife Asset Management was named Best Asian Bond House by Asia Asset Management.

As at March 31, 2012, assets under management were US$220 billion. Additional information about Manulife Asset Management can be found at ManulifeAM.com.

About Manulife Financial
Manulife Financial is a leading Canada-based financial services group with principal operations in Asia, Canada and the United States. In 2012, we celebrate 125 years of providing clients strong, reliable, trustworthy and forward-thinking solutions for their most significant financial decisions. Our international network of employees, agents and distribution partners offers financial protection and wealth management products and services to millions of clients. We also provide asset management services to institutional customers. Funds under management by Manulife Financial and its subsidiaries were C$512 billion (US$512 billion) as at March 31, 2012. The Company operates as Manulife Financial in Canada and Asia and primarily as John Hancock in the United States.

About the Economist Intelligence Unit
The Economist Intelligence Unit (EIU) is the world's leading resource for economic and business research, forecasting and analysis. It provides accurate and impartial intelligence for companies, government agencies, financial institutions and academic organisations around the globe, inspiring business leaders to act with confidence since 1946. EIU products include its flagship Country Reports service, providing political and economic analysis for 195 countries, and a portfolio of subscription-based data and forecasting services. The company also undertakes bespoke research and analysis projects on individual markets and business sectors. More information is available at www.eiu.com or follow us on www.twitter.com/theeiu

The EIU is headquartered in London, UK, with offices in more than 40 cities and a network of some 650 country experts and analysts worldwide. It operates independently as the business-to-business arm of The Economist Group, the leading source of analysis on international business and world affairs.

Media contact:
In Asia:
Ginie Lam
Manulife Asset Management Asia
Tel: +852 2202 1965
Ginie_yn_lam@manulifeam.com