A Guest Post by Lauren Finnie, Research Analyst, LIMRA International Research
LIMRA Secure Retirement Institute and the Society of Actuaries (SOA) have partnered on a joint research study to better understand Chinese consumer views of retirement in. As China slowly decreases its barriers to entry, knowledge of consumer financial needs could represent an opportunity for financial services companies.
China, like many countries, has an aging population and a growing number of retirees. The average retirement for men is age 60 and for women age 55. While the average life expectancy is age 75, half the participants in our study said they plan to live past age 85. Yet with such a long potential retirement, only 1 in 10 are “very involved” with managing their retirement savings, and only 2 in 10 have a formal retirement plan.
Social pensions were named as a major source of retirement income according to 56 percent of participants in our study. While China has made significant progress toward increasing the coverage of social pensions, its system is constrained by outdated policies and inconsistencies in providing benefits. In our study only 17 percent felt they had enough savings to last the duration of their retirement.
Aware that their current system is not sustainable, Chinese policymakers are looking to other markets, such as the United States, for guidance. They recognize the need for a combined system that offers defined benefit (DB) and defined contribution (DC) plans to increase coverage for retirees.
The vast majority of Chinese consumers save money in the bank. Among our survey participants, 70 percent had no debt. While one-third do not trust financial institutions with their money, 6 in 10 consider guaranteed returns on investments very important.
Friends and family are often the primary sources of information about retirement. Companies and advisors with transparent and clear processes are more likely to succeed in helping individuals understand investments in retirement.
In our study more than half (55 percent) of Chinese consumers were interested in tax-deferred annuity products. A tax-deferred pension scheme has been proposed and foreign insurers will be allowed to participate. If this proposal gets enacted, the product portfolio in China becomes more diverse, and thus more attractive to companies and consumers.
Our research reveals that China has familiar and unique challenges to solve on the way to better retirement outcomes. By understanding the issues now, financial services companies and professionals can position themselves for opportunity in the Chinese market.