Digitalisation catching on in Asia’s retirement space
Technology is enabling pension funds in Asia to streamline and centralise their administrative processes, enhance user experience, and create alternative investment and payment channels for their members, according to Cerulli Associates.
At the same time, fintech firms are revolutionising pension investment services and solutions with their robo-advisory services.
Centralised electronic platforms, such as the upcoming eMPF in Hong Kong and i-Invest in Malaysia, are expected to provide members with greater online access to their retirement accounts, increase the transparency of pension schemes, and lower the cost of investing.
In Hong Kong, the eMPF, which is set to be launched in phases starting 2022, is expected to enable members to easily manage and review their Mandatory Provident Fund (MPF) accounts online, making it more convenient for them to invest their excess monies in retirement savings products. In Malaysia, i-invest, introduced by the Employees Provident Fund (EPF) last August, allows members to invest their EPF savings in unit trust funds from approved fund management institutions. Besides offering tools to compare the different unit trust funds, i-invest provides a consolidated view of members’ investment holdings and information on investment costs, historical fund performance, and required statutory information. It has a maximum sales charge of 0.5 per cent for online investment transactions, significantly less than the maximum sales charge of 3 per cent through agents.
Using online platforms is also one of the cheapest and most effective ways for pension programs to reach out to a wider audience. In Taiwan, the Financial Supervisory Commission appointed online fund sales platform FundRich to run a retirement investment pilot program known as “Enjoy Your Retirement.” The nine funds in the scheme charge an annual management fee of between 0.3 per cent and 0.5 per cent, compared to 1 per cent to 2 per cent charged by other share classes of the same funds sold outside of FundRich by other distributors. Due to its popularity, FundRich reopened the platform for new investors to sign up for the nine portfolios, from Aug. 18 to Oct. 31 this year.
Meanwhile, fintech firms are revolutionising pension investment services and solutions with their robo-advisory services. In Singapore, robo-adviser Endowus offers a service which allows investors to invest their Central Provident Fund (CPF) Ordinary Account and Supplementary Retirement Scheme (SRS) savings. Pension asset managers are also partnering with fintech firms to launch robo-advisory services. Korea’s Samsung Asset Management, for example, partnered fintech firm Wealth Guide in April 2020 to help launch its new robo-adviser backed pension fund services business. Although it is still too early to measure their success, these solutions provide investors with a more personalised and curated experience, helping them to understand how to meet their retirement needs.
“More pension managers and other industry players are expected to collaborate with fintech firms, including robo-advisers and mobile wallets, to improve their digital infrastructure,” says Shannen Wong, a senior analyst at Cerulli. “In the long run, more people are likely to utilise low-fee online platforms to invest in retirement savings products. With infrastructure that offers convenience and greater online accessibility, platforms may attract more investors to put their excess monies in retirement savings products, which will be important to support the growth of the broader retirement industry, especially the third pillar.”