Financial products help people prepare for retirement in ageing society

Economy December 27, 2014 01:00

By Sucheera Pinijparakarn
The Na

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With a rapidly growing number of older persons in society, Thai banks and life-insurance companies are strongly promoting specialised savings and pension products to help pre-retirees as well as younger individuals prepare their financial security for whe



Thailand has in fact already become an ageing society, as the number of citizens aged 65 and above currently represents 9.9 per cent of the 66 million-strong population, which gives the Kingdom Southeast Asia’s second-highest ‘greying’ population after Singapore. 
By 2020, the percentage of elderly Thai people is expected to reach 14.4 per cent of the population. 
Individuals in most countries around the world now live longer because of advances in medical treatment, which means the percentage of older people is increasing.
According to a recent survey by the Thai arm of global insurance giant AIA, saving for retirement is a challenge facing many middle-class Thais, with the average savings figure perceived to be needed for retirement coming in at Bt7.6 million among this segment of the population.  
 Given the Thai demographic trend, banks and insurers are attempting to promote savings deposits and annuity insurance products among younger as well as older clients. 
Moreover, given the economic slowdown and high household debt in Thailand, banks and insurers have had to think about offering specialised features that customers can afford, as well.
For AIA, the new generation of consumers has shifted its focus from solely wealth accumulation to the quality of life during their retirement years, which includes retirement income and healthcare solutions. 
 AIA continues to leverage its experience and expertise across the region to pioneer innovative retirement solutions offering guaranteed lifetime income protection and long-term medical and critical illness care.
While retirement-solution needs are basically the same for younger working individuals and pre-retirees, the exception is their retirement time horizons – and the key differences from the insurance perspective are therefore their accumulation periods and investment-risk profiles.
 
Security and flexibility 
Consumers seek investment security and flexibility in the type of annuity products available, which – depending on their specific risk appetite and time horizon – means annuity offerings can range from single-premium deferred annuity or single-premium immediate annuity, to regular-premium variable annuity.
AIA has introduced Annuity FIX, a retirement plan for those aged between 20 and 55. No medical check-up is required. 
Customers will receive living annuity coupons for a minimum of 26 years, and the policy offers options to those who want to start receiving an annuity from ages of 55 to 59.
Under the plan, the company guarantees at least 15 years of annuity coupons. In case of death during the first 15 years, it will pay a net present value of the unpaid coupons to the beneficiaries stated in the policy contract.
The premium for AIA Annuity Fix is deductible for personal income-tax purposes.
Krungthai-AXA Life, meanwhile, has  launched the i-Wish Annuity, with a “Life does not retire” advertising campaign urging younger people to start preparing for retirement while they are young.
An i-Wish Annuity offers choices in line with the customer’s own income pattern, monthly or annually, and the freedom to choose their own retirement age, at 55, 60 or 65.
Another leading insurer, Bangkok Life Assurance, is promoting the BLA Unit Pension, under which a policy-holder is required to buy at least two units to start off with, and can buy more in the future.
Customers can easily estimate how many units they must buy to receive the required income when they are retired.
For example, a white-collar aged 30 and planning to have about Bt15,000 a month for spending for at least 15 years after he turns 60, is required to purchase 120 units, which means he will have to buy four units per year from the age of 30 to when he reaches 59.
BLA Unit Pension policyholders can also offset their outlay against personal income tax.
For ageing individuals who are worried about the financial implications of critical illness, Thai Life Insurance has introduced the Smart Senior product for those in the 50-70 age category.
Coverage does not require a medical check-up, and continues until the insured reaches 90.