Manulife Survey Says Filipino Investors’ Optimism on Pensions are Based on Some Risky Assumptions

According to the latest Manulife Investor Sentiment Index*, majority of Filipino investors feel satisfied about their government pension. However, this sentiment is based on specific assumptions and a cash-dominant approach to retirement.

Two-thirds of respondents expressed confidence that their government pension would be enough to meet their needs when they finally retire – the highest level among all surveyed markets in Asia. On the other hand, across all Asian countries surveyed, the proportion of confident investors was less than 40 percent, and as low as one-in-ten in some markets.

Although the Filipinos’ optimism seems positive, the survey indicates it is based on some risky assumptions: 

1. Investors expect their retirement income to be relatively high, at 92% of their current income – the highest estimate among all surveyed markets (Asia average 69%). 

2. They expect their retirement expenses to be relatively low, at just 61 percent of their current income, at the lower end of surveyed markets (Asia average 66%). 

3. Nearly all (95%) said that in retirement, they expect to rely on private healthcare– by contrast, in every other market only a minority expected to rely on private healthcare (Asia average 38%).

Ryan Charland, CEO of Manulife Philippines shared that while Filipino investors have high estimates of their retirement income, even if these turn out to be right, they may not be enough to cover their actual costs. “Today, people generally expect their retirement to be active, and that means expenses will likely be much higher than what many realize. In addition, healthcare tends to cost a lot more than people expect. In Asia, healthcare costs have risen about twice the rate of inflation over the past 10 years. Of course, it’s even more expensive if you go private.”

Based on the survey, Filipino investors have a high degree of reliance on their government pension, with only one in five owning an additional, private pension plan. In addition, many expect to fall back on other, less assured, largely cash-forms of income, notably savings (which they expect to make up 37% of their retirement income) and inheritance (12% of their retirement income) – in both cases the highest reliance of any surveyed markets. This cash-dominant approach to retirement is reinforced by the finding that, on receiving their pension, Philippine investors plan to deposit nearly half into the bank, the second-highest level of all markets (Asia average 35%). 

“We know that Filipino investors like to hold cash and are among the most cash-heavy investors in Asia. The latest survey shows us they also plan to be Asia’s most cash-reliant investors when retired,” stated Charland. “Keeping cash in the bank provides minimal returns, which may not even keep up with inflation.” 

I agree with him that Filipinos need not just rely on the above-mentioned factors. Given that retirement today can last for 30 years or more, retirement optimism would have a sounder basis if people start planning better by acquiring a more balanced portfolio.

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