Unlock value of property to fund retirement: Aviva

PROPERTY is a great asset but Singaporeans need to consider how to unlock its value if they wish to have an easier life in retirement, advises insurance boss Nishit Majmudar.

The Aviva Singapore chief executive believes investors may not be getting the most out of their real estate when it comes to funding their golden years.

Much of the problem lies with people not monetising their home based on sentimental reasons. But that serves only to erode the potential gains generated over time, he said.

“We earn those returns on property but we don’t want to use those returns to convert that into a good retirement, we just want to keep the property for ourselves,” he told The Straits Times on Tuesday.

The need to be able to derive good returns from property also stems from the fact that it takes up a significant portion of a person’s savings.

It is also one of the most common investments, with about 90 per cent of households in Singapore owning their own homes last year.

Mr Majmudar said the situation is different in the United States or Britain, where people invest between 40 and 50 per cent of their savings in equities.

“When the Americans and British retire, the appreciation they gained in equities will be used to fund their retirement.

“We invest more in property than equities. The appreciation we get in property, are we willing to use that?”

Mr Majmudar also expressed concerns about the proposal for retired Central Provident Fund (CPF) members to withdraw part of their CPF savings in a lump sum, subject to limits.

He acknowledges the money is useful for emergencies such as medical crises. But he reiterates the importance of ensuring that savings can continue to add to the pool of retirement funds.

“That lump sum of money is the result of many years of hard work and it is hard-earned savings. Will they be able to invest that money over a 20-year period and earn a good return?”

Mr Majmudar, who has been in the industry for about 30 years – with stints in India, Britain, the Philippines and Thailand – said many countries are facing the same pressures in meeting retirement funding needs.

That means helping people save enough in a low interest rate environment by ensuring they start saving early and are well-equipped to have a diversified portfolio to grow their savings – a strategy that is especially important given that people are living longer.

“We are on the right track, we have high savings, we are getting more aware of our responsibilities on what we need to do and we are beginning to see people invest at an early age.”

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