Findings from second-quarter Manulife Investor Sentiment Index 2014

The survey shows that although pensions are expected to be a top-three source of retirement income, when investors were asked if they were confident that their mandatory pension would be sufficient to satisfy their retirement needs, only 38 per cent could answer with a definite “yes”.

The top reason for their lack of confidence was concern the savings from the plan would not be enough to cover their retirement expenses (43 per cent). Investors are also worried that investment returns will be too low and that they are unable to predict what they will get from their plans on retirement.

In Hong Kong and Taiwan, investors expect state or employer pensions to account for 18 per cent of retirement income, while in mainland China and Japan it’s even higher at 30 per cent and 31 per cent respectively.

Survey results also reflect that almost nine-in-ten investors in Hong Kong and Japan say they lack confidence in their mandatory pensions. In Taiwan the figure is 7-in-10, and even in mainland China, where there’s a strong heritage of state support for those in retirement, almost three-in-five lack confidence.

Calls for enhancements to the mandatory pension system are however shared Asia-wide. The top request from survey respondents was for more education on retirement planning (65 per cent).

Other changes requested were for greater flexibility on withdrawing funds before retirement and a wider range of investment choices.

Investors also showed a strong preference for the contribution level to be raised, but said they felt the onus should be on the government or employer to contribute more to their pension plan (60 per cent) as opposed to themselves (30 per cent).

“Mandatory pensions are often investors’ first experience of forced saving for the future, so there’s a learning process in order to understand the features and benefits of their mandatory plan,” said Robert A. Cook, president and CEO, Manulife Asia.

“The fact that investors recognise they need more education on retirement planning is a good thing. We encourage all investors to take greater personal responsibility for their own retirement and plan for other sources of income that will support them,” he added.

Also according to the survey, investors’ lack of enthusiasm is even more apparent in the case of private pensions, with only a fifth of Asia investors saying they’ve bought an optional pension or retirement plan.

Instead Asia investors expect to turn to other sources of income during their retirement, including savings (26 per cent) and returns from other investments such as property (16 per cent).

However, the survey also shows that Asian investors aren't managing their portfolios in a way that will generate the returns they need. Just over a third say they review their investment portfolio once a quarter, and changes to portfolio allocation are rare.

“The relatively low ownership of optional pension plans and the sense that government plans won’t be enough sends investors in search of other sources of retirement income” said Donna Cotter, head of Wealth Management for Manulife Financial in Asia.

“But investors need to be sure that the alternative sources they are relying on will in fact generate the returns they expect, that the level of risk involved is not too high, and that they’re managing a diversified portfolio that will meet their needs,” she shared.

The findings show that Japan has the biggest percentage of do-it-yourself investors (76 per cent), with Indonesia, Malaysia and Taiwan all above 50 per cent.

Conversely almost three-in-five investors in the region rely on family, friends and colleagues for their financial planning advice, while just under half use mass media.

Manulife’s Investor Sentiment Index in Asia is a quarterly, proprietary survey measuring and tracking investors’ views across eight markets in the region on their attitudes towards key asset classes and related issues.

The Manulife ISI is based on 500 online interviews in each market of Hong Kong, China, Taiwan, Japan, and Singapore; in Malaysia, Indonesia and the Philippines it 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 the household and currently have investment products.

Manulife is a leading Canada-based financial services group with principal operations in Asia, Canada and the United States. Funds under management by Manulife and its subsidiaries were approximately $597 billion as at June 30, 2014.