As Asia’s population ages rapidly, the asset management sector has to help pensioners adopt “sensible” retirement investment plans, according to Andy Budden, head of solutions for Europe and Asia at US asset manager Capital Group.
He says most retirees leave their discretionary wealth in bank accounts, reflecting a generally risk-averse mindset, and that more work needs to be done to persuade them to invest in products that will help grow their capital.
“Asia’s done a good job of setting things up to help people save for retirement. But the big unmet challenge is what you do after you retire,” Budden says in an interview with Asia Asset Management.“For a lot of Asian investors, they quite reasonably think, ‘all I’ve got to get me through my retirement is my savings…I’m going to keep them safe and I’m going to put them in the bank account because that’s the safest place to keep’.”
“But actually, it ends up not being very safe because when you put it in the bank account, you get low returns, you don’t get inflation protection, you don’t grow your capital.”
He contrasts the situation in Asia with Europe and the US, where he says pensioners have a risk-taking culture because their retirement is protected either by a mandatory state pension or social security.
“Unprecedented” ageing
According to the United Nations, the population in Asia Pacific is ageing at an unprecedented pace, with 25.9% or 1.3 billion people projected to be at least 60 years old by 2050, compared with 15.1% or 722 million in 2024.
For asset managers, this demographic shift represents opportunities in the retirement investment market, according to research from PwC in 2025. The consulting firm forecast pension assets to grow at a compound annual rate of 5.01% between 2017 and 2025 to reach US$6.8 trillion.
Budden says the industry can win over retirees in Asia through innovation on two fronts.
One is what he calls “investment insurance [product] innovation” – a combination of an investment portfolio that provides upside and liquidity with some form of annuity with guaranteed income.
The other is marketing innovation, which is essentially how to position a portfolio such that it will not only deliver returns but protect investor interest.
“I’m very much hoping that our industry, over the next few years, is able to develop really sensible products for people in retirement,” Budden says. He explains that these are products which can deliver “decent” returns in the next two or three decades, protect against inflation, preserve capital when the market declines, as well as generate income.
He likens finding the right investment balance to walking a tightrope.
“Don’t take too much risk, but equally don’t take too little risk. Make sure you take just the right amount of income – not too much, not too little. It’s that very fine balance that people need. And our industry is not yet set up to help investors manage those tricky decisions,” he says.
Budden will conduct a workshop on how to address the challenges of retirement investment at a conference on April 7 organised by the Investment Management Association of Singapore.
