Corner Office Views | Q4 2022

Decumulation in Asia

Ageing trends in the Asia Pacific and the lack of sophistication of funds for decumulation present growth opportunities

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Key Points

  • Many pension plans in Asia do not have immediate plans to provide flexibility for members in terms of investing in the decumulation phase, nor do they think that their members are even ready to invest in decumulation products.
  • Australia, Singapore, and Japan stand out for their maturity, wealth, and movement of large proportions of population into retirement and the decumulation phase.

Demographics present opportunity

The Asia-Pacific region is, in the main, one of high population growth in the working-age segment. Countries such as India, Vietnam, and Indonesia exist in the demographic sweet spot where so much of the growth in the nation is in those who work, earn, spend, pay taxes, and increasingly save. Consequently, in countries like these—where pension markets are often relatively immature—the focus is almost entirely on the accumulation phase.

On the other end of the spectrum, three Asia-Pacific nations stand out for their sophistication, wealth, and the movement of large cohorts of the population into retirement and the decumulation phase. They are Australia, Singapore, and Japan. What bonds all three of them is that much more work needs to be done in product development in the private asset space. There is an unexploited niche here for financial services professionals.

Attitudes toward decumulation

Cerulli’s survey of attitudes toward decumulation by Asian asset owners indicates ambivalence and uncertainty. Many pension plans simply do not have plans to provide flexibility for members in terms of investing in the decumulation phase, nor do they think that their members are even ready to invest in decumulation products. This chimes with a survey by CoreData cited in the Australian Financial Review, which found that three out of 10 super fund senior executives said they were not very confident about meeting their covenant obligations around retirement income.

It is going to be increasingly important for pensions, and the product providers who serve them, to get up to speed and articulate a strategy for retirees in the decumulation phase. Central to that journey will be an understanding that different investment skills are needed in drawdown than accumulation, and that it is not enough to simply take existing customers and keep them invested in the same strategy while providing monthly payouts. That is an approach that will run into liquidity problems quickly, to the detriment of fund managers and retirees alike.

Despite the difficulties, the lack of sophistication at this end of the market also presents an opportunity, simply because the retired proportion of Asia-Pacific society is going to grow dramatically.


Australia’s superannuation fund industry, and its funds management industry more broadly, is among the most refined in the world in the accumulation phase: super funds alone had A$3.4 trillion (US$2.6 trillion) under management as of March 31, 2022, and they are served by products that are world-class in scale, expertise, and governance. However, retirement products, for those who have reached the pivotal point when they stop putting money into retirement savings and start taking it out, are a considerably less mature field.

There is a clear need to address this as Australia’s superannuation industry, now 30 years old, becomes increasingly dominated by those who are either in retirement or not so far away from it. By 2020, according to Fidelity, 65% of Australia’s super assets were in the hands of members aged 50 or over.

Thus, the government and regulators in Australia are looking to address the relative shortage of funds for decumulation vis-à-vis accumulation with the Retirement Income Covenant. Dubbed as a “game changer for superannuation funds,” the covenant forces trustees to consider, and articulate in writing, a strategy for individual members when they retire.


Singapore has a distinctive state-led approach to retirement savings, with the Central Provident Fund (CPF) dating back to 1955 and a public housing scheme that was linked to it in 1968. Contribution rates have increased steadily over the decades to a theoretical 37% contribution of wages today (17% of wages by the employer, 20% by the employee, for under 55s and with some minimums and ceilings involved). This has led to a total CPF balance of S$530.3 billion (US$376.8 billion) as of June 2022 from 4.2 million members, close to the entire 4.9 million adult population of Singapore.

Singapore has a life expectancy of 83.5 years and climbing. The 55–60 demographic is critical: aside from under-20s, it is the largest cohort, and will soon advance to retirement and decumulation age. The CPF Lifelong Income for the Elderly (LIFE) annuity scheme provides payouts for life, ensuring that members do not outlive their CPF savings. Despite the CPF’s attractive interest rate, there are opportunities for private annuity providers to pursue.


In Japan, little attention paid to the decumulation phase has created great potential for product development in this space, but this needs to be accompanied with a mindset shift in society, generally around financial advice and attitudes toward investment.

The population has been declining since 2009, and the drop is most pronounced in new births and the working-age population, while the elderly are living longer—by 2036, one-third of the national population will be elderly, according to the National Institute of Population and Social Security Research. The average life expectancy in Japan is 84 years, according to the OECD, among the highest in the world, and getting steadily longer.

Consequently, the pension system is of immense importance, but it is considered relatively unsophisticated in comparison to other mature societies. The public pension system is far bigger than the private sector, accounting for more than 70% of total pension assets. Moreover, defined contribution (DC) represents just one-fifth of total corporate pension assets.

There is an expectation that private pension assets will grow faster relative to public pension assets, and that assets will also migrate from defined benefit (DB) to DC—already, the size of the DB market is declining because of conversions to DC. It is hoped that this transition will also bring some badly needed momentum and innovation to the decumulation phase, which has received insufficient attention.

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