Friday 29 Mar 2024
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This article first appeared in Personal Wealth, The Edge Malaysia Weekly, on Dec 21 - 27, 2015.

 

More emphasis needed on long-term care

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As individuals take up the mantle for their own retirement, the issue of long-term care will become even more important than before. Long-term care encompasses services and products that provide health and personal care to those with chronic illnesses or disabilities. These include medical services and long-term care insurance, which provide living expenses for nursing homes. Miksa, who has bought elderly care insurance herself, understands the problem better than most.

“You are going to face this issue if family can no longer be the hub of social care for the dependents, the young children and the elderly … I have elderly care insurance because I must take into account the fact that if I can’t take care of myself, there will be no children to take care of me. Not because they don’t want to, but because they have to be in the workforce.

In the next 35 years, the old age dependency ratio of Malaysia will triple (to about 25% by 2050). This ratio, according to the World Bank, refers to the size of the elderly population compared with that of the working population, aged 15 to 64. Miksa says that while the absolute figure is lower than in other countries such as Taiwan and Japan, the ratio is still something that requires consideration. 

So, as Malaysia’s ageing population grows, healthcare and elderly care become more important than ever. Miksa gives a personal example. Her father had suffered a stroke, so her mother had to care for him and his needs as she still needed to work. “I wouldn’t be able to work and have my father with me if my mother had not been able to take care of him. So this is the problem. You need an institution or somebody to take care of your loved ones. In Europe, we look for somebody from Eastern Europe because they are looking for jobs and we are looking for someone who can care for the elderly. 

“The elderly care homes are very expensive. And if you find somebody from Eastern Europe to live with your elderly parents, it may be half the cost. Some actually send their parents to Thailand because it has specialised institutions for people with dementia, assuming that the people with dementia are not missing their home country. There, they have an environment where one person takes care of the elderly. In Europe, you have one person taking care of 10 elderly people.”

On the local front, some companies have taken steps to address the issue of long-term care. In October, K&N Kenanga Holdings Bhd and Aged Care Group Sdn Bhd announced their collaboration to address the need and support the provision of affordable and quality aged care services. Along with Aged Care and other partners, Kenanga will introduce new options for retirement, such as the upcoming CareTRUST. When launched, the product will allow individuals to allocate a portion of their personal, PRS or EPF savings or investments to “Care Trustees”, who will manage the funds allocated to their future retirement care, such as daycare centre fees, nursing home fees and retirement resorts. It also includes payments for consumables, care equipment and medical expenses.

At the recent Retirement and Aged Care conference, Kenanga Investors Bhd CEO and executive director Ismitz Matthew De Alwis described CareTRUST as a one-stop solution that will assist clients in managing their fund accumulation before and after retirement. De Alwis said the collaborators include 12 unit trust companies, more than five insurance companies and a number of PRS providers.

Taking ownership of retirement security

In September, the Global Aging Institute (GAI) and Prudential Corp Asia released a study on retirement attitudes and expectations in East Asia entitled Challenge to Opportunity: Wave 2 of the East Asia Retirement Survey. The survey found that citizens in East Asia (including Malaysia) are highly concerned about their retirement security and know that there should be less dependence on the family to provide for the elderly. In countries like Malaysia, Indonesia, Vietnam, China, the Philippines and Thailand, a large number of the respondents (between 43% and 66%) felt that the government should assume the primary role in retirement security. This is in contrast with countries like South Korea, Singapore, Hong Kong and Taiwan, where many respondents (between 40% and 61%) said the retirees themselves should be responsible for their own retirement income. 

According to GAI founder and president Dr Richard Jackson, the findings show that retirees in East Asia find themselves at a difficult juncture. “Traditional family support networks have been weakening, yet adequate government and market substitutes have not been put in place. The result is growing economic vulnerability. The retirement outlook for today’s workers is brighter in most markets, but still highly uncertain. Across East Asia, workers are very anxious about their retirement prospects, but are also very eager to improve them.”

Gradually, we see individuals taking ownership of their retirement assets. The report says a rising number of workers expect to receive income in retirement from financial products such as insurance, annuity products, stocks, bonds or unit trust funds. 

“In China, Hong Kong, Malaysia, Singapore, South Korea, Taiwan and Thailand, between 60% and 80% of workers expect to receive income from these financial assets,” it says. 

This makes it more imperative for government policymakers to close the retirement gap, such as by improving “the adequacy of state pension systems, encouraging or requiring workers to save more for their retirement, establishing more robust floors of old-age poverty protection and raising retirement ages, and encouraging longer work lives”.

According to the report, financial service providers should “satisfy public demand for financial products that convert household savings and lump-sum pension payments into retirement income streams”.

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Some companies have taken heed by introducing various products aimed at alleviating the burden of retirees. Jason Chong, CEO and managing director of Manulife Asset Management Services, cites as an example the Global Dynamic Asset Allocation Fund, an investment-linked fund with low volatility that provides regular payouts.

“Investors want steady returns and payouts, but a lot of investment products are very volatile, so we have the Global Dynamic Asset Allocation (GDAA) fund. It is a global product that aims to provide regular payouts. We can invest in equities or bonds and it can be in any part of the world and in many asset classes,” he says. 

“The idea is, the older you get, the less volatility you can stomach. But we know you cannot eliminate volatility [entirely], as the world moves in cycles. There’s the year of recession and ups and downs.

 “Let’s say a global recession like the 2008 financial crisis happens, we may avoid investing in equities and switch to bonds, commodities or whatever asset class that we think will appreciate. The idea of the product is to give a steady return and a regular payout every quarter or six months. So, for a retiree who does not want volatility, these are products you can look at.” 

Insurance products have also evolved. While some may not necessarily target seniors, they will help reduce the financial burden of those saving for retirement. According to Chong, one such product is the Manulife Cover-Me-Again, which covers policyholders twice against the same critical illness. 

“Typically, the first time a policy holder is diagnosed with cancer, there will be a payout. But after that you can’t get insured anymore. But here we will still insure you. So, these are some of the innovative products we have come out with. When we introduced them last year, no one else was offering products like these,” he says.

Prudential has also come on board by introducing PRUSenior Med, a term life insurance policy that covers medical bills for hospitalisation for those aged between 45 and 80. The plan requires co-insurance of 10% and covers ICU charges, surgery fees, anaesthetist fees, home-nursing costs, outpatient kidney dialysis bills and outpatient cancer treatment bills.

 

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