Tuesday July 05, 2022

Pakistanis are unprepared financially for life after work

January 12, 2022

KARACHI: Not many of Pakistanis are financially prepared for their life after retirement, a recent Standard Chartered bank survey found.

A new survey of affluent consumers across 12 markets by the Standard Chartered Bank showed that Pakistan is not different in terms of the readiness for retirement and 44 percent of survey respondents admitted that currently they do not save for their retirement.

“Like other markets, in Pakistan pandemic has affected the confidence of the consumers and has also induced a savings gap,” Zaigham Sheriff, GM personal segment at Standard Chartered Bank Pakistan, told The News.

“Till date, the majority of affluent people rely on investment income and cash savings and deposits as the expected sources of income in retirement. In line with the global trend almost half of the people plan to retire before the age of 65,” Sheriff added.

Globally there is growing awareness towards sustainable investing and individual affluent have factored sustainability into their financial decisions in the last year.

“I believe this is one area where Pakistan can focus as there is increasing evidence that longer term thinking about the environmental, social and governance risk of investments can help future proof investment portfolios.”

The survey also revealed that 92 percent Pakistanis have reset their life goals following the Covid-19 pandemic. The situation has increased people’s inclination towards a healthier lifestyle and concern over managing their health and wealth.

Affluent consumers are now setting new targets for their investment goals and are more open towards innovative financial products, exploring new strategies and diversifying into asset classes which offer less correlated and complementary sources of returns.

Saving for such unforeseen events and other goals like education and financial support for their children is now their top priority.

Affluent people have realised that it's important to build up an emergency savings fund and create a forward looking financial plan.

“Top priorities of the Pakistanis during the pandemic were to set more money aside for the future, they researched into new financial products, and set new goals for their investment values/performance,” said Sheriff, referring to the top priorities of the Pakistani people during the pandemic when they decided to save and invest.

Local savers and investors have always had to weigh macroeconomic trajectory, policy environment and market volatility. However, since the start of the pandemic in 2020 this has become even more crucial.

Sheriff said market stakeholders, in case of Pakistan, experienced strongly contractionary monetary policy (policy rate as high as 13.25 percent) and extraordinarily supportive policy (policy rate remained at 7.00 percent for 15 months) due to need of protecting economic stakeholders from long-term scarring due to the pandemic within last three years.

The foreign exchange market has also had two way movements in the last few years with periods of both rupee strength and weakness against the dollar.

However, since the start of FY2022 economic normalisation is underway along with policy rate hikes. The central bank has clearly shifted towards stabilisation from growth in the last fiscal year.

“Economy will continue to face both upside and downside risks but local savers and investors should take some comfort from the guidance provided by policymakers and should remain attentive to evolving domestic and external economic developments in the period ahead,” he added.

The Omnicorn variant of the Covid-19 can pose renewed challenges for savers and investors around the world and in Pakistan.

About 50 percent feel that the pandemic has made them less confident about their finances whereas 30 percent feel that the pandemic has made them more confident about their finances.

“Either of the categories does realise that there is a need to save continually and diversify. This out of necessity has accelerated the roll out and the need for adopting digital platforms at both the provider and the consumer end respectively; this digital revolution will also help flourish penetration into mutual funds and insurance due to easy and convenient access. Banking and investments on the go is the key to serve them better.”