Asian Pensions Under Pressure on Early Withdrawals

The trade-off between the needs of today and the desires of tomorrow is challenging the retirement savings systems in Asia as Covid-19 forces early withdrawals.

Retirement schemes in Asia could face funding shortfalls after pension systems in Australia, South Korea and Malaysia have allowed early withdrawals, while others in the region are under pressure to follow suit.

The ongoing Covid-19 pandemic is causing as yet untold damage to businesses across the Asia Pacific region. One immediate detrimental effect is that companies and their employees cannot afford to pay their pension contributions, which in many cases are mandatory.

The Australian and Malaysian governments are allowing investors to withdraw from their pension accounts, tax free, to help cushion the financial impact of the coronavirus.

In South Korea, one trillion won has already been withdrawn from personal pension plans, as investors utilise the money for emergency funding.

In February this year, China’s premier, Li Keqiang, announced exemptions for certain enterprises from the social insurance premium, which includes the basic state pension contribution of employers.

These examples are typical of the challenges confronting governments, who are seeing their social security-based pension systems facing acute funding shortfalls. In each country, there is a tug-of-war between the needs of today and the less tangible needs of tomorrow.

JP Morgan Asset Management’s Hong Kong-based retirement strategist Wina Appleton told AsianInvestor the pandemic’s… [read more]

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