Regardless of where you’re from, retirement is a significant milestone for the majority of workers across the globe. Signifying the end of your employment and the start of freedom, the bliss of retirement often overshadows the amount of financial planning that is usually involved to achieve a comfortable living during this period.
Despite the general consensus surrounding retirement, each and every country across the globe has their own expectations and requirements surrounding this milestone, so what does retirement look like in Hong Kong, and how are Hongkongers preparing for it?
Below we explore how Hongkongers have invested for a more comfortable retirement, and how Covid-19 has changed investment habits. With a focus on Buy-to-Let property, discover how you could reach your retirement goals with this investment asset.
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How Have Hongkongers Prepared for Retirement Previously?
While the state retirement age in Hong Kong is currently sitting at 65 for both men and women, it’s not uncommon for those with sufficient funds to retire before this age. But for those preparing for this milestone, you can expect to be enrolled on the Mandatory Provident Fund Scheme (MDF).
This pension scheme has undergone many changes over the past two decades but remains a staple in the majority of Hongkongers’ retirement plans. For part- and full-time employees over the age of 18, you can expect to contribute to this pension scheme until you reach 65.
However, Hong Kong is notorious for both it’s rising living costs and competitive property market, making additional income streams – such as investing – more appealing for those who are intending on either retiring early or long for financial freedom throughout retirement.
It’s no secret that property is a common investment vehicle across the globe, with Hong Kong investors being no exception. When exploring preferred savings groups amongst this demographic, 61% opted for property, while 55% picked stocks and shares as their chosen investment asset.
Surprisingly, only 25% of respondents used government bonds, whereas a mere 16% relied solely on personal pensions and just 12% used employer pension schemes to fully fund their retirement. Regardless of the route, these investment trends highlight the attitudes towards Hong Kong’s retirement plans, and in turn, reinforces the necessity of additional income streams.
Has Covid-19 Changed Retirement Plans?
With the undeniable impacts Covid-19 has had on Hong Kong’s economy, the majority of those approaching retirement age now have doubts surrounding their retirement plans. After 53% of this demographic had to either draw down on or reduce their retirement contributions during the pandemic, 54% of Hongkongers and Singaporeans are now unlikely to achieve the retirement lifestyle they had planned for.
Not only have more people now degraded their retirement plans, but almost half (48%) have adjusted their retirement age accordingly. While the ideal retirement age for respondents sat between 50 and 59 in 2020, many expect to retire between 60 and 69.
By exacerbating any and all concerns surrounding retirement savings, around 76% of Hongkongers now have additional income streams in place to compensate for the challenges of Covid-19, and try and restore their retirement plans.
Despite the majority of respondents having concerns about retirement, significant barriers to saving more funds for this period remain. Unsurprisingly, the climbing living costs were the most common answer, while a lack of discipline with money followed closely behind.
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How Are Hongkongers Preparing for Retirement?
For existing investors, the global pandemic has catalysed considerable changes in their financial plans. Going forward, 35% intend to diversify their portfolios and maximise their returns, with Buy-to-Let property often being a prime investment for this. The risk of an investment asset will likely determine its weight within a portfolio, due to 32% of investors planning on decreasing their exposure to risk in the coming years.
UK property has long been a safe haven for investors, and with this added caution, this asset is likely going to continue growing throughout Hong Kong portfolios. In recent months, the number of overseas landlords within the UK property market has peaked at 184,000, highlighting the reliability and diversification value of this asset amongst overseas investors.
For Hong Kong investors specifically, the UK market is considerably more affordable than the Hong Kong equivalent. Over the past 12 years alone, property prices in the city have grown by 262%, whereas incomes across Hong Kong have been stagnating for years.
With apartments in Birmingham averaging HK$215,00 less per square meter than those in central Hong Kong, the number of overseas landlords in the UK market is likely to include Hong Kong investors. Along with competitive monthly rents of HK$8,000, UK property’s competitive returns and diversification value makes it a key component to retirement investment plans.