FOR IMMEDIATE RELEASE Citibank Singapore Limited 1 February 2011 CITI FINANCIAL QUOTIENT SURVEY 2010: SINGAPORE RESIDENTS BELIEVE THEY WILL HAVE TO WORK FOR AS LONG AS THEY CAN TO SUPPLEMENT THEIR RETIREMENT INCOME Survey findings reveal that respondents think that their CPF savings are insufficient to support them through retirement; they are turning to alternative means to take them through their silver years. A recent nationwide survey by Citi on financial well-being and attitudes revealed that a large majority of Singapore residents believe that their CPF (Central Provident Fund) savings will not be sufficient to support them in their silver years. To supplement their retirement income, Singapore residents say they will have to continue working for as long as they can and turn to alternative means such as proceeds from investment and insurance products. Contrary to popular belief, the Citi Financial Quotient (Fin-Q) Survey 2010 also showed a significant majority of respondents already have alternative plans in place to supplement their CPF savings. Notably, the lingering impact of the global financial crisis, which led to the erosion of wealth, has made the rebuilding of retirement savings a top priority among Singapore residents. According to the survey, seven in 10 respondents believe their CPF savings will provide only some or little of their retirement income. Of this group, seven in 10 say they already have an alternative plan to supplement their retirement income, although only one in four (27 per cent) of total respondents have a formal retirement plan that had been developed in consultation with a financial professional. To supplement their retirement income, 52 per cent would continue to work for as long as possible. 52 percent also say they would rely on the proceeds of insurance policies and 51 per cent would turn to the proceeds of investment products. Percentages, in this instance, do not add up to 100% as respondents were allowed more than one option. 1
Of those who said they would rely on the proceeds of insurance or investment products, a significant 86 per cent currently hold or intend to purchase whole life insurance. The next most popular products are endowment plans, with half of respondents owning such plans and another 21 per cent intending to purchase them. Post-financial crisis, the top two financial concerns of Singapore residents are rebuilding their savings and saving more for retirement. More than two in five residents (41 per cent) say that the total amount of their retirement savings is still behind where it was two years ago before the crisis, while another 45 per cent say this amount remains the same as it was pre-crisis. While Singapore residents recognise the need to build their retirement savings, the findings showed that only one in five Singapore residents (22%) feel they know how much they need and are on track in this area, while another 55 per cent were not sure how much they need but had started saving. In addition, only a minority of Singapore residents think beyond their lifetime. The survey showed that only 27 per cent of respondents are looking beyond retirement and have discussed wealth transfer plans with their family members or a financial advisor. In addition, only one fifth (19%) of Singapore residents currently have an up-to-date will. Commenting on the findings, Mr. Shrikant Bhat, Head of Wealth Management, Citibank Singapore Limited, said: As the life expectancy of Singapore residents increases, along with growing expectations to maintain their lifestyles, the amount of savings they need for retirement increases too. There is new awareness that they may have to postpone their retirement. In this context, the recently announced Retirement and Re-employment Act # is a timely one. The global financial crisis too has left a lingering influence with Singapore residents realising that they will have to rely on alternative ways to supplement their retirement income. We are seeing similar trends with our own clients, who are turning to investment and insurance products to support them through their silver years. The Fin-Q survey, commissioned for the fourth consecutive year by Citi, was conducted by independent global research firm CXC Research across 11 markets in Asia Pacific, comprising Australia, China, Hong Kong, India, Indonesia, Korea, Malaysia, Philippines, Taiwan, Thailand and Singapore. In Singapore, the online survey was conducted from 23 to 29 November with 500 randomly selected respondents across gender, age and income groups. # On 11 Jan 2011, Parliament passed the Retirement Age (Amendment) Bill 2011 to amend the Retirement Age Act to introduce re-employment provisions and rename it the Retirement and Reemployment Act (RRA). RRA will come into effect on 1 Jan 2012 and will allow older employees to continue working beyond the statutory retirement age. 2
The Managing Director of CXC Research, Mr. Justin Lewis added: The Citi Fin- Q research programme is designed to measure the financial wellbeing/ preparedness of consumers to respond to short, medium and long-term financial issues. The recent survey results in Singapore show that while the global financial crisis has affected the savings and retirement plans of residents, more than half of them have put the crisis behind them and are refocusing on planning for retirement. At the same time, while there is definitely room for improvement, the trend data over the past four years show Singapore residents continue to take small steps in the right direction towards achieving financial wellbeing. About the Citi Fin-Q Survey 2010 The Citi Fin-Q Survey was designed to measure the Financial Quotient (Fin-Q Score) or financial well-being of consumers. As part of this survey, Citi scored respondents on 11 different questions closely related to financial well-being with a maximum possible score of 100. This year s overall Citi Fin-Q score for Singapore residents was 55.1 out of a possible total score of 100. This score remains unchanged from 2009, and suggests there is further room for improvement. (Refer to Annex for details on individual financial subject area Fin-Q scores). As in previous years, the demographic data revealed that Fin-Q scores tended to rise in tandem with age, income and the level of retirement savings currently set aside. Males also typically outscored females. The survey also probed the attitudes and concerns of Singapore residents over their personal financial situation, the impact of the global financial crisis on their finances, as well as their views towards investing, saving for retirement and digital banking. 3
Citi Citi, the leading global financial services company, has approximately 200 million customer accounts and does business in more than 160 countries. Through Citicorp and Citi Holdings, Citi provides consumers, corporations, governments and institutions with a broad range of financial products and services, including consumer banking and credit, corporate and investment banking, securities brokerage, transaction services, and wealth management. Additional information may be found at www.citigroup.com or www.citi.com. 4
ANNEX Summary of the Citi Fin-Q Survey 2010 (Singapore) Overall Fin-Q financial health scores: The Citi Fin-Q Survey 2010 posed questions to respondents in 11 different key financial subject areas including their approach towards budgeting, savings, credit card payment as well as the status of their insurance and retirement savings. Respondents were scored on each question depending on their answers the higher the score for the question in each subject area, the better their financial position in that area. Singapore residents had an average Fin-Q Score of 55.1 points (unchanged from 2009) out of a possible 100, suggesting there is still room for improvement. 57 per cent of Singapore residents had a Fin-Q score greater than 50. The demographic data revealed that the average Fin-Q score tended to increase according to the individual s age, income and retirement savings. Males typically outscored females. Fin-Q score highlights for individual financial subject areas: Roughly eight in 10 Singapore residents (79 per cent, up 5 per cent from 2009) said they are very satisfied or satisfied with their overall quality of life with the rest reporting that they are not satisfied. 74 per cent (up 2 per cent from 2009) are very optimistic or optimistic about their financial future. The remaining 28 per cent are worried about their financial future. A third of the Singapore residents (33 per cent) surveyed set-out and follow a monthly budget. Almost half of those surveyed (49 per cent) set aside some money as savings every time they get paid. A significant majority of Singapore residents (81 per cent, up 4 per cent from 2009) pay off their credit card balance in full in the average month. Seven in 10 Singapore residents (71 per cent, unchanged from 2009) believe they have enough insurance to protect them and their families. 5
Only 27 per cent (unchanged from 2009) have a formal retirement plan while 19 per cent (up 8 per cent from 2009) have an up-to-date will. Retirement savings and the role of CPF funds Seven in 10 believe their CPF savings will provide only some or little of their retirement income. Seven in 10 of these respondents already have an alternative plan to supplement their retirement income. (See Chart 1 below for more information) More than two in five residents (41 per cent) say that the total amount of their retirement savings is still behind where it was two years ago before the crisis, while another 45 per cent say this amount remains the same as it was precrisis. (See Chart 2 below for more information) To supplement their retirement income, 52 per cent would continue to work for as long as possible, while another 52 percent would rely on the proceeds of insurance policies and 51 per cent would turn to the proceeds of investment products. (See Chart 3 below for more information) Of those who said they would rely on the proceeds of insurance or investment policies to supplement their retirement income, 86 per cent hold whole life insurance or intend to purchase whole life insurance to (70 per cent and 16 per cent respectively). The next most popular product were endowment plans, with half of respondents owning such plans and another 21 per cent intending to purchase them. (See Chart 4 below for more information) One in five (22 per cent) feel they know how much retirement savings they need and are on track in this area, while another 55 per cent were not sure how much they need but had started saving. One in four (27 per cent) have a formal retirement plan that had been developed in consultation with a financial professional. 27 per cent have discussed their wealth transfer plans with family members or a financial advisor. Only one-fifth (19 per cent) of Singapore residents currently have an up-to-date will. Percentages, in this instance, do not add up to 100% as respondents were allowed more than one option. 6
Impact of global financial crisis and attitudes towards investing Respondents are split down the middle on whether or not there will be another major global financial crisis in the next 12-18 months (50 per cent agree, 50 per cent disagree). Half of respondents (51 per cent) have put the global financial crisis behind them and are refocusing on planning for retirement. The top three financial concerns of Singapore residents as the country emerges from the crisis are re-building their savings; saving more for retirement; and looking for a job that pays more. 39 per cent stopped investing during the crisis but are now open to investing with the right opportunity, while 15 per cent have already started investing again. Another 30 per cent stayed invested. The most popular investment instruments are stocks (54 per cent) and mutual funds/unit trusts (33 per cent). Digital Banking 77 per cent believe that digital banking services have made managing their personal finances much easier over the past few years. 80 per cent use online/internet banking to help them do all their financial transactions, while 77 per cent budget and manage their financials via online/internet banking. 7
Chart 1 The Role of CPF Savings in Retirement C PF will provide ALL of the income I will need in retirement 4 4 In very similar results to those from 2009, relativel y few Singapore residents pla ce much faith in the role these funds will play in retirement. C PF will provide A MAJORITY of the income I will need in retirem ent CPF will provide ONLY SOME of the income I will need in retirement CPF will provide VERY LITTLE of the income I will need in retirement 2010 2009 27 24 23 26 47 47 0 20 40 60 Note: Percentages may not add to 100% due to rounding While 31% (up 4% from 2009) suggest these funds will provide all or a majority of the income they will need in retirement), the strong majority (70%, down 3% from 2009) be lieve CPF savings will provide only some or very little of their retirement income. In a follow-up, two-thirds of Singapore residents (66%) said they knew how they would need for their retirement. When those who believed CPF savings would provide only some/very little of their retirement income, were asked if had put in place alte rnative plans to suppl eme nt their incomes (70%) indicated they already had a plan in place. Citi Fin-Q Survey (Dec 2010) Chart 2 Impact of GFC on Your Retirement Savings The total amount of my retirement savings is somewhat/well ahead of where it was before the GFC The total amount of my retirement savings is essentially the same as it was before the GFC The total amount of my retirement savings is still behind where it was before the GFC 19 40 41 0 20 40 60 More than two-in-five Singapore residents (41%) report that the total amount of their retirement savings is still behind where it was two years ago before the GFC. Further evidence of the lingering impact of the GFC is found in the fact that a nother 45% report that the total amount of their retirement savings is essentially the same as it was before the GFC. The demographic data shows that those with annual incomes under $50,000 (49%), those 30-39 years of age (47%) and those with retirement savings under $30,000 currently set aside (46%) were significantly more likely to report that the total amount of their retireme nts savings was still behind pre-gfc levels. Note: Percentages may not add to 100% due to rounding Citi Fin-Q Survey (Dec 2010) 8
Chart 3 Sources of Extra Income Likely to Rely on to Supplement Your Retirement Income Asked which potential sources of extra income they would likely rely on to supplement their retirement income, income generated by continuing to work as long as possible ties with the proceeds of insurance policies (both selected by 52% of Singapore residents) were the top source of extra income followed closely by the proceeds of investment products (51%). Income generated by continuing to work as l ong as p ossible The proceeds of insuran ce poli cies 52 % 52 % The p roceeds of investment products 51 % The retirement savings I m currently setting aside 44 % Savi ngs generated by cutting back on expenses 42 % Selling an investment property/properties 32 % Cash g enerated by selling your existing prop erty for cash and downgrading to a smaller unit Financial support provided by my child ren, spouse or other family members I have not thoug ht about what I will do to supplement my re tire me nt income Other 7 % 7 % 22 % 28 % 0 % 20 % 40 % 60 % Note: * Percentages, in this instance, do not add up to 100% as respondents were al lowed more than one opti on Citi Fin-Q Survey (Dec 2010) Chart 4 Insurance Policy/Investment Product Ownership and/or Purchase Intent Whole life insurance products are currently held by a significant majority of Singapore residents (70%) and a further 16% report intending to purchase whole life to supplement their retirement income. The next most popular product were endowment plans (owned by 50% of Singapore re side nts and on the purchase lists of another 21%). One product clearly not of interest to Singapore residents at the moment are reverse mortgages which 75% say they do not intend to purchase to supplement their retirement income. Whole life insurance 70 16 15 Endowment plans 50 21 29 Mutual funds 33 24 43 Annuity products 21 40 39 Long-term bonds 21 38 41 Reverse mortgage 5 20 75 0% 20% 4 0% 60% 80% 1 00% Already own Plan to purchase Don't plan to purchase Note: Percentages may not add to 100% due to rounding Citi Fin-Q Survey (Dec 2010) 9