Singapore tops financial literacy index in Asia-Pacific

The statue of Sir Stamford Raffles next to the skyline of Singapore.
The statue of Sir Stamford Raffles next to the skyline of Singapore.PHOTO: REUTERS

S'poreans score well in investment knowledge but not in retirement planning: Survey

Singapore has come out tops in the Asia-Pacific region in an annual index of financial literacy, led by a big jump in the grasp of investments.

This is the first time Singapore has ranked first in the Mastercard financial literacy index.

For the 2015 index, the Republic beat 16 other markets including Hong Kong, South Korea and Japan - and achieved a huge leap from its sixth-place ranking in 2014.

The index measures respondents' knowledge of basic money management, financial planning and investment matters.

It surveyed 422 respondents in Singapore aged from 18 to 64 in May and June last year.

Singapore is the only market in the region to have shown "overall improvement" in all three categories that are surveyed.

"Progress towards financial literacy has been stagnant across the Asia-Pacific, with the overall literacy score hitting a record low.

"Singapore was an exception, moving up and replacing Taiwan in the top spot, and is followed by Taiwan and New Zealand," MasterCard said.

Across the region, developed economies recorded largely unchanged scores, while emerging markets showed the biggest declines in scores, with "the most disappointing performances observed in Vietnam, Myanmar and the Philippines".

In Singapore, the investment component showed the biggest improvement, thanks largely to respondents' increased understanding of financial statements and interest in monitoring their investments.

Singaporeans also did better in the areas of budgeting, saving for big purchases, tracking expenditure and managing unsecured loans for the basic money management segment.

But while there was an overall improvement in the financial planning category, MasterCard noted that there was still "room for improvement when it comes to retirement planning".

Scores increased for the retirement planning component, which is part of financial planning, but it was the lowest-scoring component.

"The improvement in financial literacy in Singapore is encouraging, with more people realising the importance of budgeting, financial planning and managing their money better," said Ms Deborah Heng, group head and general manager of MasterCard Singapore.

"However, the results also revealed that people... have to make greater effort to increase financial knowledge around retirement planning, especially given the uncertain economic outlook," she added.

Meanwhile, a separate survey found that Singapore investors "lead most of their Asian peers" in aiming to quit their jobs and retire early.

It found that 46 per cent of millennial investors aged 18 to 39 and 53 per cent of investors over 40 here viewed retiring early as one of their top investment goals.

These are double the Asia averages of 24 per cent for millennial investors and 22 per cent for over-40 investors, and behind only Taiwan.

The survey commissioned by Legg Mason Global Asset Management also found that Singapore respondents anticipate needing a median sum of US$714,285 (S$968,000) to have the standard of living they plan for retirement.

Both millennial and over-40 investors said they expected to be able to reach this level of savings.

But the online study, which surveyed 5,370 high net worth investors globally with a minimum of US$200,000 in investable assets, flagged that while Singapore investors are confident in meeting their retirement goals, their investment return expectations are lower than Asian averages. On average, millennial investors here expect a 9.1 per cent a year investment return while investors over 40 expect a 7.6 per cent a year return. The Asian average is 11 per cent for both millennial and over-40 investors.

"This leads us to wonder where Singapore investors are expecting to accumulate the resources necessary to build their retirement nest eggs, let alone to reach their goals in time to retire early," said Mr Lennie Lim, managing director and regional head of Legg Mason in Asia.

The survey conducted last December and January also found that Singapore investors hold a greater portion of their assets in cash compared with their Asian peers.

For millennial investors here, cash makes up about 28 per cent of their assets and the proportion is around 30 per cent for investors over 40.

The Asia averages are 25 per cent for millennial investors and about 27 per cent for investors over 40.

"With cash holdings currently delivering low or even negative returns, we find it hard to believe that Singapore investors could achieve investment returns that exceed the savings accumulation levels of their Asian peers," Mr Lim added.

When asked about how they would cover a shortfall in retirement savings, 35 per cent of Singapore millennial investors and 53 per cent of investors over age 40 said they were willing to work longer.

This is more than double the Asia averages of 16 per cent and 23 per cent respectively.

A version of this article appeared in the print edition of The Sunday Times on June 12, 2016, with the headline 'Singapore tops financial literacy index in Asia-Pacific'. Print Edition | Subscribe