Frenetic repetition! Well, for old age maybe not…

13 January 2017

I was able to visit various parts of the Far East over the last holiday period. The development of cities was frenetic. The roads were packed, weaving between building works on every corner racing to establish a new skyscraper everywhere. Singapore was an excellent exception.

Every citizen seemed to have a determined purpose, as they sped through the hazy streets 20 deep at all times on scooters, although increasingly switching to ever more affordable cars. It was encouraging to see, but it struck me that this focus was a race to repeat what has already been achieved in the West. The rivers were packed with tugs and ships moving building materials to the centre of each area, reminding me of some of the pictures of the Thames in the mid-twentieth century.

Where am I going with this? I have no objections to the development; they have the will, the capital and significant manpower. The issue is that it is not new or innovative. Therefore, in my mind, they will build quicker, develop quicker, and reach maturity and the potential to suffer the same demographic issues that we all know, understand and usually have the preference to avoid...or will they?

As an example, Singapore maintains a Central Provident Fund. This is a compulsory savings plan for employees primarily to fund their healthcare, housing and basic retirement needs. Both employer and employee make mandatory contributions into the scheme and these vary according to age. Monthly payments start from an individual's draw down age to help meet basic needs in retirement. Depending on the individual's date of birth, the draw down age will be between age 60-65, although this may rise owing to increasing longevity. A similar theme is evident in the UK with the increases planned to State Pension age going forward. The difference is that you can use the ordinary fund (not the special retirement account) for many different purposes, such as buying a home (many being built every day), receiving income, paying for long term care, or funding higher education for younger generations...but only on the guarantee that they pay you back! An interesting - and it seems very flexible - approach to meet many more individual needs, anticipated or otherwise.

Overall, this might be a variation on the theme of the way that we save in the UK, especially with the next phase of mandatory increases to contributions into workplace/auto-enrolment pension schemes in April 2018 (phase three in 2019). However, it is interesting to note that the pressures of longer life are changing the ways in which we all save for the longer term, noting that the financial pressures do not end just because you stop work. They just change and create different fiscal pressures! Some might suggest that the new planned Lifetime ISA might help, although we think the devil will be in the detail of both the regulations and the product providers' profitability requirements.

Whatever you do, check your position now and map the pressures that your personal funds could face in later life. The team at Chapters Financial can help you with your financial planning to achieve your personal goals and, where prudent, build in flexibility to help towards some of the issues that may not be planned for.

No individual advice is provided during this blog.

Keith Churchouse FPFS


CFP Chartered FCSI

Chartered Financial Planner

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