InFocus: John Van Der Wielen & Noel Whittaker

Friends Life CEO, International - John Van Der Wielen and Australian Financial Guru -Noel Whittaker share their thoughts on Retirement Planning with Vipanchi in this latest InFocus session.

Retirement Planning is a hot topic for many. Share your thoughts on comparison between older generation & younger generation’s approach to retirement.
Noel Whittaker: The Older people did not have the luxury of time. Younger people are uniquely placed to start investing early they have time working with them and not against them. Also they are probably younger and better educated hopefully in some cases, to give a broader diversity over the assets so they automatically get the time and the ability to get it right.
John Van Der Wielen: What I’d like to add to that is– you can’t rely on the government and that comment is not criticism of any government in any country. They don’t have the money. I think people educated 50 years ago believed that the government’s job is to provide you with retirement. Younger people now understand that it is part of their job to plan early. 
Question is where are people retiring? Let’s look at Singapore for example, it is very expensive to live here, unemployment rates are low, income’s high, tax is low, so it’s a great place to make money. That’s why people come here... but to retire here, is a different issue, to retiring in Australia, or Dubai. Our research shows that lots of people will work in worldwide markets to make money they actually aspire to retire somewhere else. 
However in Singapore, we look at employer and employee contribute to retirement fund in CPF. In one sense it’s a more mature, fairer share, and it’s educating young Singaporeans the right way. I think the government here is doing the right thing.
Can you shed more light on pension systems in the world?
JVDW: As more people retire, the aging population which is growing faster is creating a workforce gap. What we see is the gap between workers and non-workers growing. So, when you look at governments’ positioning on pension you see that some are backward and some are leading in their respective countries. 
In Australia for example, their superannuation has been very successful. People are getting large sums of money, but at the moment you can spend that on basically anything you want. However, the government there is planning to enforce more responsibility on keeping some of the lump sum aside for a future pension like an annuity. This may not go down well with Australians even though it is the right thing to do. 
NW: In Australia, the age pension was given out in 1903 was 65, and life expectancy was 59, so nobody was going to reach it. Now they’ are also planning to increase the age limit. This is getting a lot of flak in the media these days.
JVDW:  Singapore has one of the fastest aging populations in the world because people these days have better life expectancy. On the other hand, the birth rate has been dropping, so I think the government here is very aware of the challenges and is trying to change things.
France, out of interest, is the only country in the world which gets to vote. There the age limit went backwards. So they’ve cost their country so much more by changing the age, and I think it went from 65 to 63, and everyone else has gone 65 to 67, 68: this is quite a unique issue in Europe.
NW: I think it’s a worldwide issue. People are aging, needing pensions from governments, governments going bankrupt because of this financial crisis… and they all vote. So it’s incredibly difficult.
So are you saying that people should not rely on pensions anymore?
JVDW: Certainly not. What I would touch on is the point around planning. Where do you put your money? One comment I want to make is that sometimes advisors, the press and everyone get confused around whether you put your money into a pension or a savings plan or a bank. The thing that changes the underlying investment is the tax and age that it’s collected at. 
Sometimes people get caught up on pension, superannuation or whatever. What we should be saying is that how much should I put aside, where should I invest it, and what are my aims and objectives, and then come back and talk about now let’s separate some for the wedding plan, some for the education and some for your health and some for pension. 
But I think sometimes we get so wrapped up in pension - it just really is a different pot. So the holistic approach to lifestyle and planning should be about thinking about how much we put aside, where should we put it, what’s our plans over a period of time, and I get annoyed from time to time that people keep focusing on the pension-only bit and that’s just a structure. Life is a bit broader than that, it’s all the different things that you need. 
How early do you see people starting to save?
JVDW: The point Noel keeps advocating is that if you start young and you’ve got a pot in place that you can actually be active in later on. In our experience we see people start saving when they are engage in financial planning and it’s never too late. But like Noel’s opening comment about time, it’s really difficult to solve when people come to you when they are 55. They say I need a massive retirement fund when I’m 65, and you ask them what they’ve done for the past 30 years, and they say nothing. Whereas someone starts at a really young age and are in a good position to retire. 
Again it goes back to education and that’s where governments like here do a really good job, because that means a 21 or 23 year old has some form of pot to bank on.
NW: I also think they did some major research in Australia recently and they surveyed people after 20 years from various economic backgrounds, and those that came from higher backgrounds tend to not be laboured, while those from lower backgrounds found it very hard to get out of. It’s due to resources, role-models… And that’s the hard thing for young people with no role models… but there are ways to get out of it, yet some people just don’t care. The major finding of the superannuation is that 80% of Australians disengaged with this. They don’t care.
We see people constantly travelling. Managing wealth in different currencies can be complex. What are your views and suggestions for them?
JVDW: If you’re really taking about the world financial planning today, it is: birth, death, divorce, religion, language, currency, culture, and we all tend to – especially when we are all moving to different countries, marrying other races, we all have different social economic needs, and that to me is an exciting upside and time in our industry. 
In my experience, a company I ran in Australia wrote to me to that they weren’t going to cover me when I was overseas. This was a really big issue for me. In scenarios like this, you need to then invest in products which counter the limitation.
Currencies are another key factor that you need to consider. You might be taxed in pounds even if you are earning overseas in dollars due to your work contract for example.
So, my advice to those travelling / global citizens is get yourself a good planner, invest in products that cater to your specific needs (especially insurance) and educate yourself about various limitations that a global citizens face today. These days’ people find it difficult to get good quality advice however, there are several advisors and companies who study the markets, understand relevant regulations and give you good advice. You just need to pick the right one.
How are you helping people and advisors to educate themselves about different products to be safe, or how can things go wrong?
JVDW: One of our strategies was to try and get someone in like Noel to help us with independent advice with seminars and coaching for the advisors as we do on a monthly basis. Does it need to be done? Yes. Do we do it well enough? Yes and no. Do we have pans? Yes, and therefore the steps to bring in Noel. 
Financial expertise is an area that we see that is becoming increasingly important with regulation and competition and products everything is becoming more homogenized, it’s becoming more difficult to differentiate. So experts like Noel, and some of the technical aspects of what we do can become quite complex, and some client scenarios we come across can be very complicated. So having technical expertise on the ground, and that’s what we will be adding this year to Singapore and the Middle East to beef up the support we provide to the advisors, so that is an area we see as very important. And that is across a vast range of different areas from tax and trust planning to regulatory aspects as well, and across investments which is also key.