This report is the findings from Aon's 2019 Asia-Pacific Global Pension Risk Survey. What are employers in the region doing to tackle the challenges they face, and how does this compare to the rest of the world?
Welcome to the findings of Aon’s 2019 Global Retirement Risk Survey for the Asia-Pacific region. Aon’s Global Retirement Risk Survey has been conducted every two years for over a decade. The survey is part of a global series of surveys that follows defined benefit (DB) plan sponsors’ risk management attitudes and practices around the world. This is the first time that the survey has been conducted in the wider Asia-Pacific region. Japan took part in the research in 2017. We also include some hot topics specific to Japanese plans at the end of this survey.
In the surveys of other countries the focus was on pensions. However, in the Asia-Pacific region, pensions are not offered in all countries and the survey focused on wider benefits offered at retirement.
The findings in this report will help sponsors to benchmark their risk management practices against those in the market in order to refine their strategies to better align with their objectives.
For many of the markets in Asia-Pacific, benefits are lump sum in nature and without post retirement longevity risk. Nonetheless, significant operational risks remain prevalent across Asia-Pacific which can result in material remediations being required (incurring both management time and cost) when governance controls fail or are found to be inadequate – across areas such as misleading employee communications, data security, cyber risk, administrative errors, poor data quality, legacy arrangements, third-party vendor risks and investment manager underperformance or failure.
In addition, there are cashflow risks, particularly for unfunded arrangements, and risks of excessive surplus with funds building up that may not be tax-efficiently accessible to the sponsoring employer.
There are many untapped opportunities to optimise arrangements across the Asia-Pacific region. At the simplest level, many firms do not leverage their combined assets (across DB and DC) to secure the best terms for their employees with third-party vendors. These differences on a year-on-year basis can result in major differences in ultimate retirement outcomes for employees over their working lifetime. This is especially critical across the Asia-Pacific region, given that the region has some of the longest life expectancies in the world (eg, Japan, Hong Kong, Singapore, Australia) combined with limited state retirement safety nets and exponentially increasing housing and health care costs — creating a perfect storm.
We also observe an increasing trend of employers engaging in wellbeing initiatives which include financial wellbeing, and refreshing their retirement plan communications to promote engagement and drive adequate retirement savings.
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