Financing longevity now a tougher trudge

EVEN before the pandemic, financing longevity was becoming more challenging in Singapore as life expectancies increased. But the Covid-19 crisis has deepened anxieties on this front.

According to a survey by life insurer Prudential, 47 per cent of Singaporeans said their finances have worsened since the start of the pandemic. Those in the 35 to 44 and 45 to 54 age brackets reported the greatest financial deterioration.

Among the 1,218 Singapore residents polled, 54 per cent say they would struggle or even be unable to meet their financial needs in the event of an unexpected illness or job loss.

43 per cent said their wage-earning prospects have worsened as a result of the pandemic.

The survey, conducted from May to June 2021, looks at how the pandemic has impacted Singaporeans' prospects of living to 100 in terms of their personal health and well-being, as well as their financial situation.

The sample is almost evenly split between people earning less than S$50,000 annually (49 per cent) and those earning more than that (51 per cent).

"The current environment, with low interest rates, price increases for food products and rentals, and broader concerns about inflation, would negatively impact most people's ability to sustain an ongoing savings plan," said Susan Soh, chairman of the Investment Management Association of Singapore and co-head of Asia-Pacific at asset management firm Schroders.

Think long-term

That said, the poll also unveiled some silver linings brought on by the pandemic.

For one, Singaporeans are thinking more carefully about their long-term financial strategies.

For instance, Soh has seen more people actively managing their portfolios and diversifying their holdings, as a de-risking strategy amid share market turbulence. Investors approaching retirement have been particularly keen to manage risks, she said.

Her teams have also observed higher activity and volumes on online wealth platforms in the past 18 months.

"The pandemic has prompted people to take a more proactive approach in ensuring their financial readiness, so that they can achieve their goals and weather uncertainties in the future," said Dennis Tan, chief executive officer of Prudential Singapore.

"This involves steps such as reviewing their insurance portfolio to ensure that they have sufficient protection in place, as well as building up their retirement funds for a longer life. Such actions will help us approach longevity with greater confidence."

Boost financial literacy

The pandemic has also increased the use of digital avenues to manage finance.

Today, 86 per cent prefer digital means for managing their banking, 61 per cent for managing insurance and 59 per cent for managing investments, the survey found.

These proportions have gone up since the start of the pandemic, and are fairly uniform across all age groups, with a few exceptions.

For instance, the share of 65 to 74-year-olds using mainly digital means to manage insurance rose from 39 per cent before the pandemic, to 51 per cent, a larger increase than among younger respondents - likely because the growth started from a lower base.

Experts quoted in the survey report pointed to the importance of boosting financial literacy, especially as people take on more risk in investing.

Sharon Ang, director of social programmes in Singapore's Ministry of Finance, said the government recognises the importance of financial literacy, pointing to the MoneySense financial education programme launched in 2003.

What is lacking, she said, is a programme or portal that consolidates these resources.

"Something that synthesises the many sources of publicly available financial information and advice would help Singaporeans focus not just on short-term goals, but also the long-term ones that will help them support their longevity," she said.

In concluding their findings, the researchers highlighted 3 areas where more work is needed to help Singaporeans' financial situations keep pace with longevity.

First, while public initiatives have raised citizens' awareness of the need to upskill and remain employable so as to support themselves for longer, more can be done to help citizens understand the risks of outliving their assets, particularly in light of the pandemic's financial impact.

Next, existing financial literacy initiatives could be integrated for easier access.

Finally, financial institutions and government should find ways to ensure that older citizens do not retreat from digital finance, even as the pandemic abates.