The coronavirus pandemic has made it even tougher this year for Asia-Pacific governments to grapple with unprecedented longevity risks to retirement savings, analysts say.
Governments' focus on "cushioning the economic effects of the coronavirus" has pushed demographic challenges from the headlines even as the window of opportunity to address issues — such as how to finance retirements that will stretch over 20 to 30 years — is closing, said Michaela Grimm, a Munich-based senior economist with Allianz Group. Ms. Grimm helped author the Allianz Pension Report 2020 the company issued in May.
The pandemic "has distracted us," shifting the focus of governments in the region from the threat longevity poses for retirement savings even as a number of countries here get old "at a pace never seen on earth before," agreed Ashley Palmer, Hong Kong-based regional managing partner, Asia retirement and investment, with Aon Hong Kong Ltd.
The U.S., U.K. and Europe took 80 years to transition from "aging societies," with 7% of their populations at 65 years of age or over, to "super-aged societies" with 20% in that age bracket. But that's happening "in about 10 years in some Asian markets," Mr. Palmer noted.
Asset owners called that shift in government focus this year understandable even if steps to provide immediate relief for workers have sometimes undercut programs designed to ensure they won't outlive their savings.
In Australia, for example, the government's move this year to allow Australians to withdraw A$20,000 from their mandatory retirement accounts helped many get through the worst of the coronavirus crisis but at the cost of falling behind "in the accumulation phase" of retirement saving, said Debby Blakey, the CEO of HESTA, a Melbourne-based super fund overseeing A$56 billion ($41.3 billion) in retirement assets for 870,000 participants.
Women account for more than 80% of HESTA's health care-focused membership so the fund already wrestles with the challenges members who spend years out of the workforce caring for family face in building up sufficient retirement assets, Ms. Blakey said.
Women typically retire "with about 40% less in their super than men and then on top of that live two to eight years longer," she noted. For HESTA, "part of this work is really thinking through the issues, not only at retirement and in terms of longevity risk in retirement but how do we support women through the accumulation stages in order to be more resilient in terms of the longevity they're likely to experience," she said.
Looking at which HESTA participants took advantage of that A$20,000 lifeline, it's primarily women under the age of 34 — in the run-up to their mid-30s when they often take time off from paid work, Ms. Blakey said. Many of those women have seen their account balances drop by about 70% so "they're now going into their primary saving years for retirement with a very low balance, and if you think about the impact of compound interest, they're missing out on a lot of that so … I actually think we're very vulnerable in the accumulation stage," she added.