Asian pensions shift onus of investing to individuals

19 February 2014   Category: News, Asia   By Asia Asset Management

The burden of saving up for retirement in Asia is gradually shifting from the state to individuals, finds a Cerulli Associates report titled Institutional Asset Management in Asia 2013.

While this has been established practice in markets such as Singapore, it is also increasingly happening across the region amid an ageing population dynamic.

In May last year, Taiwan's Private Teachers Pension Fund (PTPF) became the country's first local pension scheme to adopt members' choice. In Hong Kong, portability began in November 2012 for the Mandatory Provident Fund (MPF), when previously employers chose the product providers. In Malaysia, the voluntary Private Retirement Scheme (PRS) was launched in July 2012 to complement the state-run Employees Provident Fund (EPF).

The still-small assets in newer schemes such as Malaysia's PRS and Taiwan's PTPF point to growth potential. It will likely benefit first-movers, but it will not be plain sailing. "Competition is keen, and assets usually flow to providers that already have a strong brand name locally, and that can leverage extensive distribution networks," says Cerulli Senior Analyst Chin Chin Quah, who led the report.

Further, as individuals across the region focus on their retirement needs, products offered on members' choice schemes usually have to be simple rather than overly exotic, a requirement that may not interest all fund houses as it may mean thinner profit margins.

"Ultimately, gathering assets from members' choice pensions is a volume game," says Yoon Ng, Cerulli's Singapore-based director of Asia research. "Fund firms, especially independent ones without distributor affiliates, will have to assess whether it makes sense-from economic and corporate points of view-to offer products solely for this segment."