Pension funds feel the pressure as Singaporeans grow older

Almost a third will be over 65 by 2050 while dependency ratio is expected to grow five-fold.

In their report entitled “Saving up: The changing shape of retirement funding in a greying ASEAN”, the Economist Intelligence Unit (EIU) said that the grey phenomenon is particularly acute in Singapore where the expected growth is more than triple the percentage in 2010 (9%) and by far, the highest percentage among the ASEAN nations.

The report, published by Manulife Asset Management, also said that there will a significant knock-on effect on dependancy ratios with Singapore seeing the greatest impact. By 2050, the dependancy ratio will increase almost fivefold to a situation where every 100 workers are supporting 58 pensioners, compared to just 12 pensioners in 2010, potentially putting a considerable strain on retirement funding.

The anticipated effect of the so-called ‘greying’ ASEAN could be more pronounced in Singapore because less than half of Singaporeans are currently members of a formally constituted pension scheme. As such, it is likely that a significant numbers of people may enter old age with little dedicated financial support in place.

The report 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 cater financially for this growing army of prospective pensioners.