SINGAPORE, May 22, 2014 /PRNewswire/ -- Deteriorating health in old age is the number one concern for Singapore investors, with the challenge of affording the associated healthcare costs being number two, according to new research from Manulife.
The research, part of the Manulife Investor Sentiment Index (MISI) survey* for the first quarter of 2014, shows the grim reality of ageing and worsening health in retirement preys on the minds of Singapore investors more than anywhere else in the region. Unaffordable healthcare costs are their next big worry, followed by the inability to maintain their current standard of living.
While three quarters of Singapore investors consider themselves to be fairly healthy, on average they expect recurring long-term healthcare expenses to set in from about the age of 59. But the research also shows that Singaporeans recognize the health issues ahead and are taking steps in order to be prepared.
Three in five investors have a personal health or medical insurance plan, and of these two thirds say the insurance is enough to meet their current needs. Two thirds of respondents say they will purchase, renew or maintain their personal health insurance during retirement. However, the findings also show that a further 17 per cent wish they could but believe it won't be possible. They say that either their policy will not be renewable after a certain age or that there is no insurance policy available to cater for their needs.
"We see in the survey findings that as people get older, they realize they tend to be healthier than they originally thought, so the impact of higher health expenses is delayed, say from late '50s to mid '60s. That said, however, it's a reality that those higher costs will kick-in -- that's inevitable. So it's important to be prepared," said Ms. Annette King, President and CEO of Manulife Singapore.
Reliance on state healthcare as costs rise
Almost three quarters (72 per cent) of investors expect that their medical needs during retirement will be taken care of by public medical services. This reliance is particularly strong among those closer to retirement -- respondents below the age of 35 expect a higher reliance on private healthcare.
However, despite the widespread expectation of support from the public sector, Singapore investors anticipate that during retirement, healthcare and medical expenses will account for 13 per cent of their monthly expenses, second only to household expenses and daily necessities (19 per cent). At present, healthcare expenses account for 10 per cent of investors' monthly income.
"Singaporeans recognize that healthcare costs will rise as they get older but they are misguided if they think that healthcare costs will account for a similar slice of the household budget in retirement as it does now," said Ms. King. "During the past ten years, per capita healthcare expenditure in Singapore has risen by 15 per cent a year on average(Note 1) plus they aren't factoring in the possibility of being hit with costly chronic diseases like cancer or heart disease."
In Singapore, one out of every three deaths is a result of heart disease or stroke(Note 2). Meanwhile, the number of people diagnosed with cancer has risen 15 per cent in the five years to the end of 2012 when it reached over 12,000 cases(Note 3). Healthcare costs in Singapore, meanwhile, have risen faster than inflation in recent years; up about 40 per cent since 2000, compared to just over 25 per cent for consumer prices(Note 4). Total healthcare costs in the Asia-Pacific region have been projected to grow at over 8 per cent a year through to 2020(Note 5).
Perhaps unaware of or downplaying the size of the hole healthcare costs will leave in their wallets, Singapore investors are generally optimistic about being able to afford a comfortable retirement. Although more than four in ten expect their spending level to increase over the course of their retirement, 59 per cent of Singapore investors think they will be able to maintain their current living standard during that time.
Investors remain optimistic about retirement and investment
Just as Singaporeans are sanguine about retirement, they take a similar view towards investing in general. Investor sentiment in Singapore was +11 in the first quarter, flat from a year earlier and down slightly from the previous quarter. The figure was below the regional average of 24, but well above the sentiment readings for Taiwan and Hong Kong, both of which were in negative territory.
Amy Low, Head of Singapore Equities with Manulife Asset Management, explains: "Singaporean investor sentiment towards equities showed quarter-on-quarter improvement from +16 to +19. This comes despite a year of relative volatility on the Straits Times Index due in large part to investment outflows from the region alongside the US Federal Reserve's Quantitative Easing taper."
"While the potential for further outflows remains a risk factor, we agree with this relatively optimistic investor outlook. Singapore is highly integrated with the global economy and local companies should benefit from continued global economic growth in 2014. We see the opportunity to drive positive returns based on careful selection of local stocks with stable earnings outlooks and strong franchises that are trading at attractive valuations. In this category we are particularly constructive on selective exposure to offshore/marine and commodity stocks."
For more findings and related information from the Manulife Investor Sentiment Index in Asia, please visit http://www.manulife-asia.com.
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