Asian pension industry set to get further boost from ageing population and growing wealth
Veteran pension expert Rex Auyeung shares his tips on retirement planning
The pension industry in Asia has enjoyed a bull run over the past decade on the back of an ageing population and growing wealth, and the good times are likely to continue as mainland China and Hong Kong are still at the early stage of their pension reforms, according to Principal Financial Group’s Asia chairman Rex Auyeung Pak-kuen.
“An ageing population has led many Asian countries to reform their pension systems over the past two decades. The growing wealth of the middle class has also created huge demand for retirement planning. These have provided business opportunities for Principal in the region over the past 23 years,” Auyeung told the South China Morning Post.
A veteran specialist in pension plans, Auyeung is going to retire this month after working in the retirement sector for 40 years.
He brought Principal, a US financial firm in the insurance and pension businesses, to Hong Kong in 1994 and set up the operations from scratch with just seven staff. Twenty-three years on, the company has expanded to one with 1,400 staff and 6,000 agents with offices in Hong Kong, mainland China, India, Malaysia, Thailand, Indonesia and Singapore.
Headquartered in Iowa in the US Midwest with strong expertise in the 401k pension scheme, Principal embarked on an international expansion in the early 1990s and hired Auyeung to develop its Asian business.
“I was managing the employee benefit business at AIA when Principal approached me. I saw this a golden opportunity as I could establish a business in Asia from scratch. This was a huge challenge,” he said.
At the time, the company was choosing between Singapore and Hong Kong to set up its Asian headquarters and eventually opted for the city due to its proximity to mainland China, which it believed to be an important pension market globally.
Principal has since become the fifth-largest Mandatory Provident Fund provider in Hong Kong.
In mainland China, the company has a fund management joint venture with a 25 per cent stake while China Construction Bank Corp holds 65 per cent and state-owned China Huadian Corp 10 per cent.
“We believe in working with partners. In [mainland] China, we team up with Construction Bank. In Hong Kong, we team up with banking partners to sell our products. We also have partners in Malaysia to do the Islamic asset management business. Strong local partners like Construction Bank have helped us a lot in developing in the local market as they have a strong brand name and local talent to help sell our products,” Auyeung said.
He believed the outlook for the pension business in Asia would remain upbeat in the coming decades.
“When compared with the US, Europe and South America, where their pension business has developed for 40 to 50 years, the MPF system has been in existence in Hong Kong for just 16 years, and a privately run retirement business has not even been fully developed in mainland China. An ageing population, people’s growing affluence and the increase in life expectancy mean retirement plans have become a must for everybody,” Auyeung said.
In 2035, 24 per cent of Hong Kong’s population is expected to be aged over 65, double the proportion now. The mainland would reach that level even sooner, in 2030, government statistics showed.
According to data released by Japan’s Ministry of Health, Labour and Welfare, the average lifespan for women in Hong Kong is 87.32 years, and 81.24 years for men, both the longest globally.
Japanese women take second place at 87.05 years, while Iceland and Switzerland share the second position in the men’s category at 81 years.
“Traditionally, many Asians raised children to prepare for their old age. But now many people, including myself, do not have children. They want to have a professionally run pension plan to prepare for their retirement,” Auyeung said.
Auyeung is turning 65 this year, meaning he will be able to take his MPF contribution and returns back.
“I am very happy with my own MPF investment. I have voluntarily contributed more than the minimum requirement of 5 per cent by setting aside 20 per cent of my income for my MPF. I also have a diversified portfolio in my MPF with investments in stock funds in Asia excluding Japan, guaranteed funds, global bond funds and Hong Kong equities. I review the portfolio every quarter and make changes where necessary,” he said.
Auyeung’s MPF plan has generated an accumulative return of 60 per cent in 16 years, which he believes can bring a decent retirement life for him, his wife and their two dogs.
“One should start saving up for their pension plan as early as possible, preferably before the age of 40 to allow more time for contribution. They should also make extra voluntary contributions to ensure good retirement planning,” he said.