7 in 10 count on cash savings for retirement

Seven in 10 investors in Singapore plan to rely mainly on cash savings for their retirement, a recent survey has found.

But nearly nine in 10, or 87 per cent, do not think their planned source of income will be enough to support them after leaving work.

It also found investors expected hefty returns - but were not necessarily willing to take the sort of risks needed to achieve such returns.

The study polled 500 investors in March on their planned sources of retirement income. It found that cash savings were the most popular nest egg, followed by Central Provident Fund (CPF) savings and CPF Life, with 63 per cent of respondents planning to rely on the system.

The survey allowed respondents to name multiple sources of income.

It also found that:

• 44 per cent planned to use insurance and annuity products;
• 35 per cent would rely on investment properties;
• 34 per cent chose unit trusts and investment funds;
• 30 per cent were looking to equities;
• 17 per cent planned to put their money in bonds;
• Only 12 per cent said they would receive an allowance from their children.

But nearly nine in 10 were not confident that their plans would be enough, and said they would like to invest in new asset classes to boost their retirement income.

Of these alternatives:

• 42 per cent of all respondents planned to look into investment properties;
• 40 per cent into fixed deposits; 34 per cent into equities;
• 24 per cent were interested in other managed investments;
• and 22 per cent said they wanted to invest in bonds.

The survey, done by global asset management firm Schroders, also found that 95 per cent of investors planned to invest for regular income in the long term.

But Schroders warned that its report might indicate "overconfidence" among investors.

An overwhelming 93 per cent of investors expected an average return of 10 per cent on their investments in the next 12 months. But they planned to put just 21 per cent of their portfolios in assets such as equities with higher returns and risks.

On average, they intended to place 42 per cent of their portfolios in lower risk and return assets such as cash and 37 per cent in medium-risk assets such as bonds.

Schroders saw a bias towards short-term investing, with 45 per cent of respondents preferring investments that yielded outcomes within one to two years.

Ms Susan Soh, managing director at Schroder Investment Management (Singapore), said the survey highlighted a "clear disconnect" between investors' expected returns and their attitudes to risk.

Expecting double-digit returns within a year while placing under a quarter of their portfolios in higher-risk assets was not "a realistic approach to investing", she said, suggesting that investors seek professional advice to "balance the risk profile with the returns they are seeking".

ariellim@sph.com.sg

This article was first published on May 24, 2015.
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