Feeling the Squeeze Asia's Sandwich Generation

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Feeling the squeeze Asia’s Sandwich Generation

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Contents

Preface 3

Executive summary 4

Introduction: sandwiched between young and old 6 How large is Asia’s sandwich generation? 8

1. Family responsibilities 10 Filial values 10 Children come first 11

2. Financial pressure 13 Education is a priority 13 Parents cost money too 15 Japan: an ageing outlier 17 Costs are expected to go up 18

3. Working harder, saving less 20 Taking fewer risks 21 Reeling from the financial crisis 22 A dearth of financial advice 24

4. A happy retirement? 25 The pessimists 25 The optimists 26 From doting to dotage 27

Conclusion: a generation under pressure 28

Appendix: survey results 29

Disclaimer

© 2010 The Economist Intelligence Unit. All rights reserved. All information in this report is verified to the best of the author’s and the publisher’s ability. However, the Economist Intelligence Unit and the sponsor do not accept responsibility for any loss arising from reliance on it. Fidelity, Fidelity International, and Fidelity International and Pyramid Logo are trademarks of FIL Limited and are used with its permission. Neither this publication nor any part of it may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior permission of the Economist Intelligence Unit.

2 © Economist Intelligence Unit 2010 Feeling the squeeze Asia’s Sandwich Generation

Preface

Feeling the squeeze: Asia’s Sandwich Generation is an Economist Intelligence Unit report, sponsored by Fidelity International. The findings and views expressed in this report do not necessarily reflect the views of the sponsor. The report’s quantitative findings come from a survey of 700 respondents in Asia, conducted in April and May 2010. The Economist Intelligence Unit’s editorial team designed the survey. Anna Morris was the author of the report and David Line was the editor. Gaddi Tam was responsible for design. To supplement the quantitative survey results, the Economist Intelligence Unit also conducted in- depth interviews with relevant experts and individuals supporting parents and children. We would like to thank all interviewees for their time and insights.

August 2010

Executive summary

The burdens on the Sandwich Generation—those people “sandwiched” between the competing demands of caring both for their children and for their parents—have gained attention in Western countries over the past 30 years. Rising longevity and declining fertility have combined to swell the number of elderly needing care and reduce the number of workers supporting them. Parents are also waiting longer to have children, and more of those children require support through higher education, raising the likelihood that middle-aged workers will end up having to support older and younger generations simultaneously. Asia, in which Confucian principles demanding respect for one’s parents have always been strong and great value is placed on educational attainment, can expect rapid growth in the ranks of its Sandwich Generation in the near term—and greater burdens upon them in the future. This report, sponsored by Fidelity International, examines Asia’s Sandwich Generation: their priorities, the challenges they face, the impact of providing for multiple generations on their financial situation and their plans for old age. It is based on surveys of members of this cohort in Australia, China, Hong Kong, Japan, Singapore, South Korea and Taiwan, and in-depth interviews with experts on regional demographics, financial professionals and members of the Sandwich Generation themselves. The results show that members of Asia’s Sandwich Generation are typically between the ages of 30 and 45, married, and supporting one or two children and two parents or parents-in-law. Across the countries surveyed, this cohort is an estimated 20% of the working-age population (defined as between 21 and 70 for the purposes of this report). The key findings of the report are as follows:

• The pressures of supporting parents and children on Asia’s Sandwich Generation have grown as children stay at home longer and life expectancy rises. Asia is in the midst of a fundamental demographic transformation as large numbers of people move into old age and the elderly begin to outnumber the young. But demographic change has already altered the Asian family in important ways. As life expectancy has increased and women have entered the labour market and delayed having children, families are simultaneously caring for young children and ageing parents more than in the past, and doing so while both spouses work. But although the challenges of providing for parents and children may have increased, in Asia the Sandwich Generation’s sense of filial obligation remains strong, with 78% agreeing that it is their responsibility to help their ageing parents.

• Education is a top priority and key expense for the Sandwich Generation, and they are willing to pay handsomely for the investment in their children’s future. Although their commitment to their elderly parents is strong, Asian Sandwich Generation members uniformly spend more time and money caring for their children, and their children’s education is the primary concern. Even if they are not paying steep school fees at private schools, between the cost of tutors, sports and music lessons, and any number of extracurricular activities—which parents consider an integral part of their education—the expenses are

4 © Economist Intelligence Unit 2010 Feeling the squeeze Asia’s Sandwich Generation

considerable. Moreover, many expect to continue paying for their children into early adulthood: 58% of Sandwich Generation members expect to care for their children into their 20s.

• Caring for parents can also be expensive, especially where the social safety net is weak. In regions where the elderly often lack pensions or access to public healthcare services, the burden is heavier on Sandwich Generation members to cover their parents’ costs out of their own pockets than elsewhere. Sandwich Generation members in China and Hong Kong find themselves spending more on their parents than their Asian peers, the result of underdeveloped social security systems that provide little support for retirees or their families. However, parents frequently assist the Sandwich Generation in return, providing childcare or other support.

• The Sandwich Generation is working harder, saving less and taking fewer risks with their investments in order to provide for the needs of their children, their parents and themselves. More than one-third of Asia’s Sandwich Generation members have had to work harder to cover family expenses since becoming “sandwiched”. At the same time, about half have reduced their savings and investments, and nearly two-thirds are more cautious with their existing investments than they would otherwise be. Unsurprisingly, they mostly prefer low-risk bank deposits as their primary savings vehicles.

• Although most of Asia’s Sandwich Generation is actively saving to finance retirement, many foresee a lower standard of living once they stop working. For the most part, members of Asia’s Sandwich Generation are contributing to public and private pensions or insurance policies, but 42% overall expect their standard of living to decrease once they leave the workforce. South Korean and Japanese Sandwich Generation members have the highest level of anxiety about their retirement years. The mood is very different among those in China, many more of whom (51%, compared with an aggregate of 22%) expect that public benefits will increase in the future. Regardless of their projections for the future, few Asian Sandwich Generation members (16%) seek professional advice in financial planning.

• Because there will be fewer of them, the next Sandwich Generation will shoulder more onerous burdens than the current one. As fertility rates have fallen, the Asian family has become smaller, which means that today’s Sandwich Generation members will have fewer children to care for them in their old age than their parents did. So while the absolute numbers of the Sandwich Generation may not increase over the long run, in the future people will have fewer siblings with whom to share the increasingly heavy burden of caring for ageing parents.

Key points n An estimated 20% of the working-age population across Australia, China, Hong Kong, Japan, Singapore, South Korea and Taiwan are members of the Sandwich Generation—those people supporting parents and children simultaneously. n The sandwich generation is biggest in China and smallest in Australia and Japan. n Demographic trends—increasing longevity, delayed childbearing and smaller family sizes—are increasing pressure on those caring for parents and children.

Introduction: sandwiched between young and old

n 1981, sociologist Dorothy Miller coined the expression “the Sandwich Generation” to identify a Isegment of the population of middle-aged adults caring for their children as well as their ageing parents. While some experts debate the finer points of the definition—such as whether one’s children must be young or grown—today the Sandwich Generation is broadly understood to be those people supporting themselves, their children and their parents at the same time. The Sandwich Generation is not a new phenomenon in Western countries, many of which have already experienced rapid population ageing and delayed child birth among women. But to what extent is the workforce in Asia “sandwiched” between generations? Cultural precepts stressing filial piety mean many

Figure 1 Asia: population by age group: 1950-2050 0-14 15-60 60+ 3,500,000 3,000,000 2,500,000 2,000,000 1,500,000 1,000,000 500,000 0 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050 Source: Derived from United Nations Department of Economic and Social Affairs/Population Division, World Population Prospects 2008, medium variant projections. Figures are in thousands. Definition of Asia is broader than in the survey; full definition is available at http://esa.un.org/unpp/index.asp

Figure 2 Asia: births by women under 30: 1995-2050 350,000

300,000

250,000

200,000 1995-2000 2000-2005 2005-2010 2010-2015 2015-2020 2020-2025 2025-2030 2030-2035 2035-2040 2040-2045 2045-2050 Source: Derived from United Nations Department of Economic and Social Affairs/Population Division, World Population Prospects 2008, medium variant projections. Figures are in thousands. Definition of Asia is broader than in the survey; full definition is available at http://esa.un.org/unpp/index.asp

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Asian households contain several generations. This may suggest that a larger percentage of working-age people in Asia than in the West are supporting elderly parents as well as young children. In addition, Asia is expected to undergo significant demographic change of the kind already experienced in the West. Increasing longevity means more people living longer once they have retired (Figure 1). And those in the workforce are waiting longer to have children, raising the likelihood that their parents will be retired before their children are grown (Figure 2). Declining total fertility is also likely to mean the burden of caring for today’s middle-aged Sandwich Generation members will be shared by fewer siblings (Figure 3).

Figure 3 Total fertility: 1955-2050 Asia Europe North America 6

1 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050 Source: Derived from United Nations Department of Economic and Social Affairs/Population Division, World Population Prospects 2008, medium variant projections. The chart shows the average number of children a hypothetical cohort of women would have at the end of their reproductive period if they were subject during their whole lives to the fertility rates of a given period and if they were not subject to mortality. Region definitions are available at http://esa.un.org/unpp/index.asp

These demographic shifts will have a profound impact on the region’s economies, as the number of working-age people shrinks and the number of non-working grows (a rising dependency ratio; Figure 4). Though on a macroeconomic level the burden will be borne by all households, those in the Sandwich Generation will bear the greatest weight, financial and otherwise. Many of them face the challenges of caring for three generations—their parents, themselves and their children—without much assistance in the form of social security or public healthcare. How are members of this cohort in Asia coping today? What sacrifices have they had to make? What implications does their position have for their own retirement?

Figure 4 Dependency ratio: 1950-2050 Asia Europe North America 85 80 75 70 65 60 55 50 45 40 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050

Source: Derived from United Nations Department of Economic and Social Affairs/Population Division, World Population Prospects 2008, medium variant projection. Chart shows number of non-working-age per 100 working-age in population (defined by UN as between 15-64). Region definitions are available at http://esa.un.org/unpp/index.asp

About the research The survey sample included only people who fall into the “ABC1” socioeconomic classification (that is, “middle class” workers earning local median income For this report the Economist Intelligence Unit levels and above, or with comparable purchasing surveyed 700 individuals in Australia, China, Hong power). In conducting the survey, the principal Kong, Japan, Singapore, South Korea and Taiwan (100 goal was to ascertain how the burden of supporting per country). Survey findings for “Asia” in this report parents and children affects the decisions of working- refer to aggregate results across these countries. age adults in relation to their disposable income and Survey respondents were between the ages of 21 and investment/saving behaviour. Low-income earners 70 and supporting at least one child and one parent, typically do not have the financial means to support financially or otherwise. (Although this age group multiple generations, nor are likely to alter their was selected to capture the widest possible range of investment, saving or retirement planning (if any) Sandwich Generation members, the results showed given the burden of caring for multiple generations. only a tiny minority—0.4%—of all respondents were As such they are not considered as part of the aged over 60.) Both sexes were equally represented. Sandwich Generation in this report.

To better understand the challenges facing Asia’s Sandwich Generation, the Economist Intelligence Unit surveyed middle class, working-age people in Australia, China, Hong Kong, Japan, Singapore, South Korea and Taiwan. (For additional details on the survey see the box above.) The EIU also conducted in- depth interviews with experts on regional demographics, financial professionals and individuals in the surveyed regions who identify themselves as members of the Sandwich Generation. How large is Asia’s sandwich generation?

1 Defined in this report as The EIU estimates that an average of 20% of the working-age population1 across China, Japan, Hong between the ages of 21 and 70. Kong, Singapore, South Korea, Taiwan and Australia are members of the Sandwich Generation. However, the size of this cohort varies considerably between regions: it is largest in China, where an estimated

Figure 5 Asia’s Sandwich Generation Prevalence of Sandwich Total Working-age Generation in working-age Implied number of people in Country population population* population** Sandwich Generation Australia 20.4m 16.3m 6% 1.0m China 1.3b 1.0b 37% 370m Hong Kong 6.9m 5.5m 27% 1.5m Japan 127.4m 89.2m 6% 5.4m Singapore 4.3m 3.4m 26% 0.9m South Korea 47.6m 38.1m 18% 6.9m Taiwan 23.1m 18.5m 19% 3.5m

* Over 21 and under 70, estimated at 80% of total population except for Japan (70%). NB, The incidence of survey respondents over 60 years of age meeting the definition of Sandwich Generation member is 0.4%. ** See “About the research”, above, for explanation of Sandwich Generation socioeconomic classification. Sources: Economist Intelligence Unit calculation based on survey response rate. Total population data from United Nations Department of Economic and Social Affairs/ Population Division, World Population Prospects 2008, except Taiwan (National Statistics).

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37% of the working-age population is supporting multiple generations. The Sandwich Generation is a significant cohort in Hong Kong and Singapore too, making up an estimated 27% and 26% respectively of the population aged 21-70 (Figure 5). Taiwan has a smaller but still considerable Sandwich Generation, making up 19% of its working-age population, as does South Korea (18%). In these places, more working-age people are sandwiched between parents and children than in the US, where an estimated 13% of the population is facing these responsibilities.2 2 “Baby Boomers Approach Age 60: From the Age of Japan and Australia have the smallest Sandwich Generation of the countries surveyed, accounting Aquarius to the Age of for only 6% of the working-age population in both places: a result, perhaps, of the well-developed social Responsibility”, Pew Research Center, 2005. These findings security systems in those countries that provide more generous pensions and relieve some of the financial refer to “baby boomers”, Americans aged 41-59. The burden of caring for the elderly. Cultural factors (in Australia’s case) and these countries’ relative wealth median household income of may also be explanatory factors. In addition, Japan’s longevity and the health of its senior population this group is higher than that of all other American adults. is another factor, with many people supporting themselves long enough to avoid sandwiching their offspring between generations. The typical member of Asia’s Sandwich Generation is between the ages of 30 and 45, married, supporting one or two children and two parents or parents-in-law, and is feeling the pressure of these responsibilities. Members of Asia’s Sandwich Generation are facing steep expenses, particularly the cost of educating their children, which they view as an indispensible investment for their offspring’s success. They also feel a strong sense of responsibility to care for their ageing parents, and the burden to finance that care falls heavily on them. Asia’s Sandwich Generation is working harder to meet the costs of care-giving, with many taking on more work, but also saving and investing less than before, and being more cautious with the investments they do make. And while they are reluctant to cut back on the support they provide their families, and particularly their children, their situation has made them pessimistic about their own futures. Although they are actively funding their retirements, many expect their standard of living to go down after they retire—an unfortunate development for a generation that, for the most part, has watched incomes rise and standards of living improve throughout their adult lives.

Key points n Sandwich Generation members, and the Chinese in particular, feel a strong sense of obligation to care for their ageing parents. n While children are their top priority, many spend a significant portion of their time and money caring for their parents.

1. Family responsibilities

he phenomenon of caring for multiple generations is as old as the family itself, but Asia’s demographic Ttransition is increasing pressure on working-age adults. This means that unlike previous generations that often needed to care for their ageing parents only once their own children were grown, many families in Asia today are caring for young children and old parents at the same time, and doing so while both spouses work. So while providing care to both parents and children is not a new scenario, the challenges of doing so have increased. These challenges, however, have not eroded the Sandwich Generation’s enduring sense of obligation to care for their ageing parents, and their willingness to provide their parents with physical and financial support. But the Sandwich Generation is also deeply concerned with facilitating their children’s future success and focused on creating opportunities for them. Their children are their primary priority, and the Sandwich Generation is willing to spend significant time and resources to ensure they have every advantage to succeed. Filial values Confucian ideals hold filial piety, or respect for one’s parents and enduring dutifulness to them, as the highest virtue. It is therefore not surprising that despite rapid modernisation, shrinking family size, growing demands on their wallets and the increasing influence of individualistic “Western” values, members of the Sandwich Generation in Asia feel a strong sense of obligation to ensure the care of their parents through their old age. In fact, 78% of Asia’s Sandwich Generation “Singapore is agree that it is their responsibility to help their ageing parents. still dominated This sentiment is strongest in China, where 87% of respondents feel by Asian values. responsible for their parents’ care. Kwok Hong-Kin, assistant professor Children recognize of sociology and a fellow at the Asia-Pacific Institute of Ageing Studies at their filial duties Lingnan University in Hong Kong, highlights the enduring strength of this and feel it is their responsibility: “Filial piety in Chinese society is still very, very strong”, he responsibility says. “It is clear from my research that, no matter their age, the Chinese have a to care for their strong sense of responsibility to look after their parents.” parents.” Members of the Sandwich Generation in China are also spending more time —Tan Ern Ser, Associate caring for their parents than their Asian peers, and are second only to Hong Professor of Sociology, National University of Kong in how much of their income they spend on their parents, a function of Singapore China’s lack of social insurance or long-term care for the elderly (discussed 10 © Economist Intelligence Unit 2010 Feeling the squeeze Asia’s Sandwich Generation

further in Chapter 2). While on aggregate 69% of survey respondents are helping their parents financially in addition to supporting their children, 83% are doing so in China. Singapore is also representative of this trend. “Singapore is still dominated by Asian values,” says Tan Ern Ser, associate professor of sociology at the National University of Singapore. “Children recognize their filial duties and feel it is their responsibility to care for their parents.” In South Korea it is not only filial obligation, but also a sense of gratefulness that underpins the Sandwich Generation’s respect for their parents, whose hard work turned a nation devastated by the Korean War into a prosperous, modern country with a powerful economy and a high standard of living. This group “has seen its parents work very hard to build up the Korea we have now”, says Thomas Klassen, associate professor of political science and public policy at York University in Toronto, and an expert on retirement and South Korea. “They worked six days per week for 52 weeks per year, so the Sandwich Generation feels a kind of obligation to take care of their parents because of the sacrifices those people made.” Strong bonds between parents and children and feelings of obligation to care for one’s parents as they age are not unique to Asia. But the abiding strength of filial piety in Asian cultures, combined with the absence of alternative systems of care for the elderly in many of these countries, results in a pervasive expectation among the Sandwich Generation that they will be the primary providers for their ageing parents, even as their own families grow. Children come first While members of Asia’s Sandwich Generation are certainly committed to supporting their parents, they say that their children are their top priority, and in every region surveyed respondents spend considerably more time caring for their children than their parents, as may be expected. More than one-third (34%) of people surveyed spend over 40 hours per week caring for their children, and another 37% spend between 20 and 40 hours. But the vast majority of respondents, 80%, spend less than 20 hours per week caring for their parents (Figure 6).

Figure 6 Figure 7 Hours per week spent caring for family members (Asia) Proportion of income spent on family members (Asia) (% respondents) (% respondents) Children Parents Children Parents 0-10 1-10% 10 8 50 46 11-20 11-25% 19 41 30 39 21-30 26-40% 24 33 12 12 31-40 41-50% 13 12 4 2 More than 40 More than 50% 34 6 4 1 Source: Economist Intelligence Unit survey Source: Economist Intelligence Unit survey

Sandwich Generation members also uniformly spend a higher proportion of their income on their children than their parents. About half (51%) spend more than a quarter of their income on their children, but only 15% spend this much on their parents. (Figure 7). The fact that Sandwich Generation members spend more money on their children than their parents is unsurprising in that most parents in this demographic will have at least some form of income or savings. It is also exaggerated by the high costs of raising a child, particularly when it comes to education (discussed further in Chapter 2). Sandwich generation members are quite clear that their children come first when it comes to their resources. Of her 13 year-old son, one member of Hong Kong’s Sandwich Generation, a working mother who is also supporting her mother and mother-in-law, says: “We always worry about his educational funding, we always plan to save for him. We think of him first and make sure he’s got enough money for his education before we think about our leisure or travelling.” According to Anne Tay, vice president of wealth management at OCBC Bank in Singapore: “Members of the Sandwich Generation face three competing drains on their financial resources: themselves, their parents and their children. If they have just one dollar to spend, it will go on their children. If they have two dollars to spend, the second dollar goes on parents. If they have three dollars, the third will be spent on themselves.”

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Key points n Many Sandwich Generation members report struggling to cope under the pressure of supporting parents and children, and most expect family expenses to increase over the next five years. n Education is a major expense for Sandwich Generation members, who view it as an investment in their children’s future success. n Caring for parents is less costly, but it is still a drain on resources, particularly where elderly parents have limited access to public benefits that would help offset the cost of their care.

2. Financial pressure

upporting parents and children simultaneously poses daunting financial challenges. While 63% of Srespondents overall report that they are “coping” or “coping well” with the burdens of caring for parents and children, many are not (Figure 8). More than one-third of respondents (36%) report that they are “struggling to cope”. In places like China and Hong Kong, where few elderly can count on pensions or public assistance, and the costs of educating children may be very high, the combined burden on Sandwich Generation members may be overwhelming.

Figure 8 How is Asia’s Sandwich Generation coping? (% respondents) We are struggling to cope We are coping We are coping well Asia 36 39 24 Australia 35 50 16 China 45 16 39 Hong Kong 53 28 19 Japan 30 39 31 Singapore 21 56 23 South Korea 26 60 14 Taiwan 42 29 29 Source: Economist Intelligence Unit survey

Education is a priority Education is a major expense for the Sandwich Generation: 75% of its members are currently investing in their children’s education. In part this stems from cultural pressures to prioritise learning. “The emphasis on education is very high in Chinese society, no matter whether it’s in Taiwan or mainland China, or other countries with Confucian influence such as South Korea or Japan,” says Chin-Chun Yi, a research fellow focusing on family life at Academia Sinica, a research institution in Taiwan. This extends to concern about competition for university places, for which Sandwich Generation parents are keen to provide their children with every advantage from an early age. As Mr Klassen

notes, acceptance to the best universities is what “all South Korean parents want and expect”. And the competition can be intense. A Hong Kong Sandwich Generation member, whose teenage son attends private school, feels the pressure he faces is significant. “Kids in Hong Kong have to compete with all the kids in China, all the kids in Asia, so it’s very competitive now.” Preparing children to succeed in this environment means that educational expenses can be very high, starting as early as primary school. In Asia’s richer cities the burden can be considerable if parents wish to educate their children privately. In Hong Kong, private primary school tuition can cost over US$20,000 per year. With an average annual income of US$29,850 in 2009 (at market exchange rates), this is an option that very few can afford. School fees are a considerable burden even on those in the middle and upper income brackets surveyed for this research. This may be why 53% of Hong Kong Sandwich Generation members—compared with 36% overall—say they are “struggling to cope” with their responsibilities. Elsewhere, the choice between public and private fees is not as clear, but the financial burden can be equally steep. Mr Kwok of Lingnan University says that in China parents must often fork over significant “donation fees”, amounting to thousands of US dollars, to secure their children’s places in respected schools. “In some big cities like Shanghai, Guangzhou and Beijing, if the children are admitted to a famous school—primary or secondary—they need to pay a so-called ‘sponsorship’ to the school.” Such payments are quite common, he says, and because they are considered as “donations”, the transactions are legal. Zhang Ting, a member of China’s Sandwich Generation who is a co-owner of several restaurants in Shanghai, says his family’s most significant financial commitment is his six-year old son’s education. “I think the highest cost—I don’t want to call it a burden, but rather an investment—is education,” says Mr Zhang. “We want to send him to one of the best schools. We may need to pay up to RMB 50,000 [over US$7,000] to those who will help us place him into the school. We also spend quite a lot for private lessons. He’s learning piano, and we have a piano teacher coming to teach him an hour a week, that’s RMB 400 [US$59] each time.” Mr Zhang is not alone in funding educational extras for his child. In “Now there are addition to school fees, expenses related to tutors, sports and music lessons, also growing extracurricular activities, and any number of activities that boost children’s numbers of young chances of being admitted to a prestigious university add up. In Taiwan, people living with where 91% of respondents (compared with 75% overall) are investing in their their parents well children’s education, it is the norm for students to spend hours in after-school into their late 20s tutoring programs. “If you want to apply to better colleges and enroll in good or even early 30s.” majors, the competition is fierce,” says Ju-Ping Lin, associate professor of —Ju-Ping Lin, Associate human development and family studies at National Taiwan Normal University. Professor of Human Development and Family The same is true in South Korea. “Education is just so important in Korea Studies, National Taiwan because it’s a country without any natural resources, so the only resource it Normal University has are people,” says Mr Klassen. “Parents are under tremendous pressure to educate their children to the greatest extent, and almost all parents pay for extra classes, for tutoring, all kinds of extras.” South Korean parents are so committed to ensuring their child has every advantage

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that it is not uncommon for at least one parent move to Seoul, where the best universities are located, to support their university-age child. Parents don’t consider these costs to be extra. Ms Lin says that if the Sandwich Generation has to cut corners, “they won’t cut the expenses on raising kids, especially on education”. But the Sandwich Generation can also count on paying educational bills for years, even decades. Just as the expenses begin at an early age, they are also likely to continue until children are in their 20s or later. In Taiwan, “Support for grown-up children in their early 20s through college is regarded as the norm,” says Ms Lin, as is parents underwriting the costs of their adult children’s graduate or doctoral studies. “Now there are also growing numbers of young people living with their parents well into their late 20s or even early 30s,” Ms Lin says. This may be why 58% of Sandwich Generation members in Asia expect to care for their children into their 20s, and why 73% of Taiwanese do. ”Children continue to depend on their parents longer than, say, during the sixties or before,” says Mr Tan of the National University of Singapore. This phenomenon of prolonged adolescence suggests that even people whose parents are self-sufficient when their children are young may nonetheless end up members of the Sandwich Generation after their children have completed university. Parents cost money too While caring for their parents is less time-consuming and costly than caring for their children, and many members of the Sandwich Generation can share those responsibilities with siblings, it is still a drain on their financial resources. Thirty-nine percent of Asia’s Sandwich Generation members are spending between 11% and 25% of their income caring for Figure 9 their parents. Proportion of income spent on parents (% respondents) In Hong Kong and China people are spending 1-10% Asia China Hong Kong even more. Fifty-two percent of Chinese 46 30 respondents and 49% of Hong Kong respondents 25 spend between 11% and 25% percent of their 11-25% income on their parents, and 23% of Hong Kong 39 52 respondents spend between 26% and 40%, 49 compared with 12% overall (Figure 9). The lack 26-40% 12 of fully developed pension schemes in many 16 23 countries in Asia is a major contributor to the Sandwich Generation’s dual burden of maintaining 41-50% 2 parents and children, and it may explain the higher 1 2 expenses the Sandwich Generation faces in Hong

More than 50% Kong and China. 1 In Hong Kong a means-tested old-age pension 1 1 is available for the elderly poor, but the income Source: Economist Intelligence Unit survey and assets of all family members with whom the

senior lives (or from whom they receive support) are taken into account in determining eligibility. This often excludes the parents of the middle class from receiving payments or even accessing publicly funded long-term care. “If you are middle class and have a certain amount of income you do not qualify for comprehensive welfare, and so you have to pay out-of-pocket,” says Odalia Wong, head of the sociology department at Hong Kong Baptist University. “Nor are you qualified to send your parents to a government-operated elderly home.” So elderly parents either live with working-age children (a situation that is not uncommon in Asia, but which has been becoming less so) or they receive care at private nursing institutions, which are expensive—especially the comfortable ones. Moreover, although medical care is heavily subsidized, Mr Kwok points out that patients often have to pay for medication, which can be quite expensive, especially for a chronic condition. “If the family can afford it, they are forced to spend these large amounts of money,” he says. Families who can afford it may also opt for private medical care to avoid the long waits for treatment at Hong Kong’s public hospitals, driving up expenses even further. In China and South Korea, “social insurance systems are relatively underdeveloped”, says Richard Jackson, director of the Global Aging Initiative at the Center for Strategic and International Studies (CSIS) in Washington DC. “Not just the old age part of it, but healthcare and unemployment and everything else.” Savings rates in China are high in part for this reason—money saved serves as a hedge against sickness, unemployment or any other disruption to income. And while some Chinese retirees are able to count on comfortable pensions from the state-owned enterprises where they spent their working years, the children 3 “China’s Long March to Re- of those who have no pensions are largely paying for their parents’ care from their own pockets.3 tirement Reform”, Center for Strategic and International In South Korea the situation is quite similar. “Since our government sponsored long-term care Studies, 2009. program is in its early stages, seniors rely on family and private care. It is very expensive and tends to force households to go bankrupt if seniors have a chronic disease such as cancer,” says Sung-won Kang, a research fellow at South Korea’s Samsung Economic Research Institute. Few retired workers have substantial savings or pensions, public or private, “The relationship to contribute to the cost of their care, and although means-tested welfare is between the middle available, only 14% of elderly South Koreans received benefits in 2005, and generation and their parents is 4 “The Aging of Korea”, Center those benefits averaged less than US$80 per month.4 for Strategic and Interna- actually reciprocal. tional Studies, 2007. The exception in Asia, however, is Japan. Of the populations surveyed, the Japanese spend the least on their parents, both in terms of hours and money. While they provide Almost three-quarters (73%) of Japanese Sandwich Generation members financial support to spend under 10% of their income on their ageing parents, compared with 46% their parents, their overall who spend this much. Japan’s case differs from that of many of the parents also help do other countries surveyed in that it has a generous system of social assistance house chores and, for the elderly. Long-term care insurance covers about 90% of the cost of most important of all, help nurse the 5 Ministry of Health, Labour health care for people over 65 years old.5 Many of Japan’s elderly retirees are and Welfare, Japan: http:// kids.” www.mhlw.go.jp/english/ also supported by generous company pensions, earned during the years of —Chin-Chun Yi, Research topics/elderly/care/2.html. rapid economic growth. Even if they are not, many are fit enough to support Fellow, Academia Sinica

16 © Economist Intelligence Unit 2010 Feeling the squeeze Asia’s Sandwich Generation

Japan: an ageing outlier Sandwich Generation members spend between 11% and 40% of their income on their parents, the majority of Japanese spend less than this, with 73% of Japanese spending only up to 10%. Similarly, When it comes to the pressures exerted by an ageing society, Japan 78% of Japanese respondents report spending 1-10 hours per week could be expected to face the most daunting challenges in Asia. caring for parents, compared with an average of 50% of respondents Japan’s over-60 age group counts for 30% of its total population; across Asia who spend this amount of time (Figure 10). in Hong Kong, the second oldest society in Asia, the over-60 cohort makes up only 18% of the total.6 Yet despite Japan’s large numbers Figure 10 Time and money spent on parents of elderly, its Sandwich Generation is the smallest of the regions (% respondents) surveyed: only 6% of Japan’s working-age population, compared with a) What proportion of your income is spent on your parents? 27% in Hong Kong, report that they are sandwiched between parents 1-10% Japan Asia and children. 73 46 According to Hiroko Akiyama, professor at the Institute of 11-25% Gerontology at the University of Tokyo, the Sandwich Generation 15 39 phenomenon never became an issue affecting large numbers 26-40% of people in Japan, despite predictions to the contrary. The 10 12 combination of longevity and good healthcare for Japanese 41-50% citizens—which includes long-term care for the elderly—has 1 largely insulated working-age Japanese from the demands of 2 More than 50% simultaneously caring for parents and children. 1 Japanese women may have the longest lives in the world (86) and 1 7 Japanese men the 4th longest (79) but they also remain healthy b) How many hours per week do you/your spouse spend caring late in life. For 80% of Japanese men and women, it is only in their for your parents? 0-10 Japan Asia mid-70s that they begin to require some assistance in their daily 78 lives.8 Thus, the elderly are more capable of remaining independent 50 of their families’ care than elsewhere. “By the time one faces the 11-25 15 need to care for parents in Japan, it is likely that one is already done 30 raising children,” says Professor Akiyama. 26-40 6 In addition, comprehensive public healthcare and access to long- 12 term care (Kaigo Hoken) services help to relieve the financial and 41-50 1 time burdens on working-age adults of caring for parents. “In the 4 past, nursing care was socially imposed almost entirely on women, More than 40 but there is now the option to make use of the long-term care 0 4 insurance scheme,” Professor Akiyama says. “A lot of people do use Source: Economist Intelligence Unit survey this while they continue working.” In other parts of Asia, like China and Hong Kong, people cannot turn to comparable social services to 6 “Population Ageing and Development”, United Nations Department of Economic assist them in caring for their ageing parents. and Social Affairs/Population Division, 2009. These factors may explain why the Japanese Sandwich 7 Population projections for Japan (as of December 2006), National Institute of Population and Social Security Research, Japan. Generation spends the least amount of time and money caring for 8 Hiroko Akiyama, “Conceptualising science and society in the age of longevity”, its parents among those surveyed. While on aggregate, 51% of Asian Science Journal Kagaku, Vol. 80 No. 1, January 2010, Iwanami Shoten.

themselves by working for years after reaching retirement age, as the country’s extreme longevity attests. (See also the box on Japan, p17.) It is important to keep in mind when considering the Sandwich Generation’s elder-care costs that their parents often assist them in return, in monetary and non-monetary ways. Ms Yi of Academia Sinica points out that grandparents will often provide care for their grandchildren. “So the relationship between the middle generation and their parents is actually reciprocal. While they provide financial support to their parents, their parents also help do house chores and, most important of all, help nurse the kids.” Mr Zhang in Shanghai agrees, saying his parents are not a burden yet. Mr Zhang is now paying the mortgage on the apartment where his parents are living, but “as a matter of fact, they actually help a lot,” he says. “My parents paid the down payment—50% of the overall price—for our first apartment 10 years ago when I first moved to Shanghai.” Costs are expected to go up The Sandwich Generation is clearly facing significant expenses to maintain their children and parents, and they expect these costs to go up in the near term. Overall, 78% of respondents believe that the cost of their children’s education will increase over the next five years and 69% believe the same of their parents’ healthcare. Singaporeans worry the most about cost increases. Some 67% of Singapore’s Sandwich Generation, compared with 51% overall, are expecting an increase in their parents’ daily living expenses, and 88% are expecting increases in the cost of their children’s education (Figure 11).

Figure 11 Rising costs expected over the next 5 years (% respondents) Asia Increase significantly Increase moderately Stay the same Decrease Not applicable Children’s education 36 42 17 41 Parents’ daily living care 11 40 43 4 1 Parents’ healthcare 22 47 27 2 1 Your own healthcare 13 42 41 3 1 Children’s healthcare 12 41 39 6 1

Singapore Increase significantly Increase moderately Stay the same Decrease Not applicable Children’s education 51 37 11 1 Parents’ daily living care 20 47 31 2 Parents’ healthcare 26 55 19 Your own healthcare 18 47 33 2 Children’s healthcare 20 45 32 2 1 Source: Economist Intelligence Unit survey

18 © Economist Intelligence Unit 2010 Feeling the squeeze Asia’s Sandwich Generation

Mr Tan attributes this to what he says are Singaporeans’ middle-class ambitions. “With higher aspirations, expectations and longevity, the general perception is that costs are always on the rise,” he says. “I don’t subscribe to the view that Singaporeans are living from hand to mouth. Rather I would argue that even as their hands grow bigger, so do their mouths. Singapore aspires to be a middle-class society, and it can be quite costly maintaining a middle-class lifestyle.” Whatever their aspirations, the belief that their basic living costs are on the rise worries people, and so many members of the Sandwich Generation have redoubled their efforts at work.

Key points n Many Sandwich Generation members have had to work harder to pay for the care of their families since becoming “sandwiched”. n At the same time, they are saving and investing less than before, and are more risk-averse with the money they do invest.

3. Working harder, saving less

s a result of the demands of caring for both parents and children, the Sandwich Generation is working Aharder. More than one-third (36%) of those surveyed say they have to work harder to pay for the care of their families, and another 14% have taken on additional jobs. Mr Zhang, who is overseeing the launch of his third restaurant, welcomes the opportunity to increase his income. “With a new restaurant opening now, I can earn more money. I think this is a kind of healthy pressure on my side to push me work harder and make more money. That’s my duty to my family.” But along with working harder, the Sandwich Generation is also reducing their savings and investments, a trend that may foreshadow trouble when it comes time to retire. More than half of Sandwich Generation members (58%) have reduced or spent savings to meet their immediate living costs. Almost half (49%) have also reduced the amounts they invest or liquidated investments for the same reason.

Figure 12 Caring for parents and children means ... (% respondents) a) Savings (Asia) I/we have had to reduce the amount we save to meet immediate living costs 36 I/we have had to spend some of our existing savings to meet immediate living costs 22 I/we have increased our savings because we anticipate higher costs in the near term 15 I/we have stopped saving (ie, we spend all of our income each month) 9 No change 16

b) Investment (Asia) I/we have had to reduce the amount we invest to in order to meet immediate living costs 32 I/we have had to spend some of our existing investments to meet immediate living costs 17 I/we have increased our investments because we anticipate higher costs in the near term 13 I/we have reduced the amount we invest because we anticipate higher costs in the near term 9 I/we have stopped investing 10 No change 19

Source: Economist Intelligence Unit survey

20 © Economist Intelligence Unit 2010 Feeling the squeeze Asia’s Sandwich Generation

In China, while similar numbers of people have reduced or liquidated savings and investments as the overall average, 27% have actually increased their savings and 26% have increased investments because they anticipate that their near-term costs will go up, compared with 15% and 13% respectively overall. Wang Yong, a private banker at China Merchants Bank in Shanghai, suggests the reason for these contradictory outcomes is that China’s Sandwich Generation is far from being a single unit. Income differentials between families within this cohort will lead to divergent savings behavior. “One group of people will have to cut their expenses to meet the growing demands of healthcare and education because their disposable income is not growing as fast as the increase in prices,” Mr Wang says. “The other group is much better off, so that their accumulated wealth is increasing and the inclination is for investment.” Australians, by contrast, have gone in the opposite direction, with 20% reporting that they have stopped saving altogether to cover their daily expenses, compared with 9% overall, and 25% have stopped investing, compared with 10% overall. Taking fewer risks With the money they do manage to save and invest, the Sandwich Generation is taking fewer risks. Most respondents (64%) say they are more cautious with investments than they would be if they only had themselves to look after (Figure 13). So their discretionary savings overwhelmingly go in bank deposits, with 79% of people indicating that banks are among their top two primary savings locations.

Figure 13 Sandwich Generation’s attitude towards risk (Asia) (% respondents) I/we are more cautious with investments than I/we would be if we had only ourselves to look after 64 No effect 24 I/we take more risk because I/we need higher returns 12 Source: Economist Intelligence Unit survey

This preference is attributable in part to the Sandwich Generation’s desire to avoid high-risk investments given their family responsibilities. One Hong Kong Sandwich Generation member says her husband, who works in the financial industry, “will not put [our savings into] risky investments because he knows that we have somebody at home that we need to take care of”. Sandwich Generation members may select savings vehicles that they are confident will both protect their principal today and ensure their children’s inheritance tomorrow. Hyun Jin Jun, senior manager of wealth management at Shinhan Investment Corporation in South Korea, says that there, middle-class Sandwich Generation members’ principal concern is maintaining their wealth and passing it on to their children, rather than exposing it to risky investments. Many elsewhere feel the same. Consequently, Asia’s Sandwich Generation tends to be risk-averse: after bank deposits, respondents from South Korea, Japan, Taiwan and Singapore opted mostly for insurance products as secondary savings vehicles.

Hong Kong and China, however, showed a strong preference for the stockmarket. Forty-eight percent of Hong Kong respondents and 40% of those in China named the stockmarket among their top two savings locations, compared with 29% overall, suggesting that these Sandwich Generation members have a higher risk tolerance than some of their Asian counterparts (Figure 14). In this respect, these investment preferences are representative of broader trends in China. “I think there’s a sort of investment mentality in China where people put the majority of their savings into something very safe and then they gamble with the rest of it,” says Mr Jackson. “There’s no long-term investment strategy. It’s either bank deposits or a crapshoot in the stockmarket.” Ms Tay of OCBC Bank believes that stockmarket investors in Singapore are “In Singapore also missing an investment strategy. “Investment in the stockmarket tends to investment in be very short-term, very speculative and very emotionally driven,” she says. the stockmarket “Some investors look at underlying fundamentals, but many are driven by tends to be very sentiment in the broader market. When investors buy into the stockmarket, short-term, very they don’t tend to be long-term ’buy and hold‘ investors.” speculative and South Korean Sandwich Generation members are more sceptical about very emotionally putting their money in stocks and shares. “They have seen the Korean driven.” stockmarket repeatedly fail to yield high returns, even in the long run,” —Anne Tay, Vice-president, says Mr Kang. “Their portfolio consists of high-risk, high-return real estate Wealth Management, OCBC Bank investments and safe financial investments.” Mr Klassen calls this a two-part savings plan. The first part is to purchase a house. But “housing is a relatively risky investment, so they compensate by taking any other cash and putting it into these conservative financial instruments”, like insurance products. Insurance products also allow Koreans to avoid taxes that would reduce their children’s inheritance, thereby safeguarding their accumulated wealth for the next generation, says Ms Jun. Reeling from the financial crisis The Sandwich Generation’s relatively conservative views on investing may have been reinforced by the global financial crisis, which negatively affected the financial situation of 40% of those surveyed. As a result of the crisis, 41% of people polled will need to delay retirement, 44% have adjusted their lifestyles and 37% expect they will probably need to work part-time after they retire. Sandwich Generation members across the seven countries surveyed reported a similar impact. Singapore is typical, with 40% of Sandwich Generation members saying that the financial crisis had affected their financial situation, 51% saying they will have to delay their retirement as a result and 55% saying they have had to adjust their lifestyle. Their investment preferences have also changed, according to Ms Tay: “When it comes to choosing investment vehicles, Singaporeans have a firm preference for physical, tangible assets. That means property. This is the case generally, but this preference has increased since the financial crisis struck. The crisis has hit people’s confidence in paper or financial assets.”

22 © Economist Intelligence Unit 2010 Feeling the squeeze Asia’s Sandwich Generation

Figure 14 Sandwich Generation’s top two savings locations (% respondents) Asia Australia China Hong Kong Japan Singapore South Korea Taiwan Bank 79 85 83 63 94 84 80 66

Stockmarket (direct investment/individual shares) 29 9 40 48 17 29 26 31

Insurance products 27 5 21 31 21 34 34 42

Property 14 17 19 14 8 10 17 13

Mutual funds 10 5 13 7 8 4 13 18

Pension funds 7 7 9 6 4 6 9 10 Not applicable—we don’t have any savings 2 4 0 3 0 2 1 3 Source: Economist Intelligence Unit survey

Figure 15 A dearth of financial advice How does the Sandwich Generation make decisions about savings and investments? (Asia) Despite the fact that they face mounting costs in (% respondents) caring for their families, declining savings and I/we make my own decisions 79 investment rates, and for the most part receive low I/we take financial advice from my banker rates of return on the investments they do make, 6 very few members of the Sandwich Generation I/we take financial advice from my insurance agent in Asia seek the advice of professional advisers 5 I/we take financial advice from an expert that is not tied to a bank or in creating a financial strategy. Four out of five an insurance company (independent adviser) Sandwich Generation members make their own 4 decisions about savings and investments. Only I/we take advice from friends or family 4 16% rely on the counsel of financial or insurance I/we leave all the decisions to a discretionary wealth manager professionals (Figure 15). 1

One reason for this may be sensitivity about Source: Economist Intelligence Unit survey revealing personal information to relative strangers. “Singaporeans, on the whole, are reluctant to discuss their personal wealth and finances with strangers like IFAs [independent financial advisers],” says Ms Tay. “If they have a friend who is financially well-educated, they will seek him or her out rather than an unknown professional.” Attitudes in Hong Kong are similar. Professor Wong of Hong Kong Baptist University thinks that people are likely to ask, “Why should I show you all of my accounts, all my properties? Who are you?” She adds: “We’re very conservative, we don’t trust people easily and we don’t consult financial advisers as readily as Westerners.” Mr Wang of China Merchants Bank says in China investors are also sceptical that financial advisers have much insight to offer. “The Chinese stockmarket, as everybody knows, plays quite a lot on [inside] information, so they don’t really appreciate the advice of professional financial advisers.” Rather they will look to those who they believe have the kind of information they need. On this basis, it is not entirely surprising to find that, overall, mutual and pension funds rank at the bottom of respondents’ preferred savings vehicles, with 10% and 7% respectively using these financial products in their top two savings locations. Ms Jun and Ms Lin both agree that the reason is not that the Sandwich Generation is unaware of such products, but rather that they do not have much income left at the end of the month to invest. The typical member of the Sandwich Generation is “not [as wealthy] as people in their 40-50s who may need to seek external help on wealth development”, says Ms Jun. “They choose saving in bank deposits rather than other financial vehicles because they need to do so.”

24 © Economist Intelligence Unit 2010 Feeling the squeeze Asia’s Sandwich Generation

Key points n Most are saving for retirement through public or private pension contributions or insurance annuities, but many expect their standard of living to decrease when they retire. n South Koreans and Japanese are the most pessimistic about retirement, while the Chinese are the most optimistic. n Most respondents are not looking to their children to support them in their old age.

4. A happy retirement?

ith all the large expenses facing members of the Sandwich Generation—expenses that they may be Wcovering for two or three decades—it is not surprising to find that many people are worried about their future financial security. To be sure, they have considered how they will fund their retirement, and most are actively saving for it, either through private pension contributions, public pension contributions or insurance policies. But many (42% overall) expect their standard of living to decrease once Figure 16 Sandwich Generation retirement expectations (Asia) they leave the workforce (Figure 16). Do you think you will be able to maintain your current standard of living once retired? (% respondents) The pessimists No 42 South Korean and Japanese members of the Yes 33 Sandwich Generation are the most pessimistic Don’t know about their retirement futures, with 61% and 57% 26 respectively reporting that they do not think they Source: Economist Intelligence Unit survey will be able to maintain their current lifestyles once retired. In Japan, where pensions are relatively more generous than elsewhere and elderly living standards are high, such attitudes may be related to the country’s long period of economic stagnation and persistent deflation. South Korea’s economy may be growing faster than Japan’s, but the Sandwich Generation remains gloomy for a number of reasons. One is the lack of public assistance for the elderly. “We don’t have a proper safety net to prepare for retirement. Our pension market is small. Our national pension has a very low replacement rate. And most Korean firms force their employees retire at age 55,” says Mr Kang of Samsung Economic Research Institute. According to Mr Klassen of York University, “People are quite pessimistic that the public pension plan is going to be of much assistance, and that’s partly because in the past 20 years there have been several reforms to public pensions, and each time the changes have made public pensions a lot less generous.” The low retirement age is the second factor feeding South Korean insecurity. “The Sandwich Generation are people who will be forced to retire when they’re in their 50s. There’s this policy of employers basically firing—we can call it ’mandatorily retiring’—workers in their 50s,” says Mr Klassen. There are a number of reasons for the low retirement age, including the fact that older Korean employees

are expensive and employers are eager to let them go, and that forcing the older tier of workers out of the workplace is seen as a way to ease South Korea’s youth unemployment problem. Because members of South Korea’s Sandwich Generation cannot rely on public pensions, they will keep working, but for less money. “Now they don’t retire permanently, they start a second job as a taxi driver, as a security guard, or, if they’re lucky, they’ll open a restaurant,” says Mr Klassen. “So they’re going to go from jobs where they’re well paid, and they have all kinds of safety-nets, into part-time or temporary types of employment. And at the same time they’re probably still going to have a child or children in university because they are just in their 50s. On top of this, they’re going to have their own parents who are going to be older,” very few of whom will be covered by South Korea’s National Pension System. These factors, combined with the threat that the mass ageing of South Korea’s population and resulting change in the labour force will stymie GDP growth, explain the acute sense of insecurity South Koreans are feeling. The optimists The mood is very different among Chinese Sandwich Generation members, the majority of whom (58%) believe they will indeed maintain their current standard of living into retirement, a result perhaps not as surprising as it may first appear. After all, many of the members of China’s Sandwich Generation came of age during a time of remarkable economic growth and rising living standards. Many in this group expect the Chinese economy to keep growing at a double-digit pace, or near it, year “China’s Sandwich after year, as it has done their whole adult lives. Generation may The growth that they are counting on to maintain their living standards be in a position may over time undercut the savings they are making today. Even though where they really today’s Sandwich Generation is “saving hand over fist”, says Mr Jackson of are depending as CSIS, these savings are going into bank deposits “where the real rate of return much or more than is zero or negative. You have wages and the cost of living growing very rapidly, today’s elderly on you have people trying to prepare for the future by undertaking all of this their children.” precautionary and retirement savings, but it’s all earning such a low rate of —Richard Jackson, Director, Global Aging Initiative, return that it’s not going to buy them much 15 or 20 years from now. So they Center for Strategic and International Studies may be in a position where they really are depending as much or more than today’s elderly on their children.” China’s Sandwich Generation may also be lulled into a false sense of security that pension reform in the near future will ensure their comfort several decades from now. A majority of respondents in China, 51%, expect the government will increase social benefits—far higher than the 22% on aggregate with a similar expectation. But outside of the minority working for larger companies that participate in a new private pension scheme, the Enterprise Annuity System, those looking forward to a liveable public pension are likely to be disappointed. “The government tells them that the pensions system is going to give them a minimum 50% or 60% replacement rate, and they don’t do the actual arithmetic,” says Mr Jackson. “There’s a little bit of a disconnect”, he says, between what they expect and what the reality is likely to be, “which is not unique to China.”

26 © Economist Intelligence Unit 2010 Feeling the squeeze Asia’s Sandwich Generation

From doting to dotage Half of the respondents in China also expect that their children will care for them in their old age (compared with 36% overall), which is another possible explanation for their optimism. However, it is notable that outside of China and Hong Kong (where 48% of parents are looking to their children for care in old age), members of the Sandwich Generation expect far less from their children than they are willing to provide for their parents. One explanation for this, says Ms Lin, is the growth of wealth in these countries. “For the current older generation, support from their grown-up children is still their largest source of support. However, the current middle generation in general is much richer than their parents,” and they hope to be able to care for themselves in their old age without relying on their children’s support. Mr Zhang shares this mindset. “I think my son will look after us, but I don’t think that’s a need, because I believe we will save enough and have enough assets when I retire to look after ourselves. We need to provide good opportunities for him to grow, so that he will get a good job and have a bright future. If that’s the case, there is nothing we will worry about.” Members of the Sandwich Generation are reluctant to burden the children whose success in life they worked so hard to provide, and this is especially the case in places where small families have become the norm. The Hong Kong Sandwich Generation member mentioned above expects that her son will face significant pressures of his own as an adult, and to avoid compounding those pressures she and her husband are planning to provide for themselves in their old age. “It’s not that I don’t think he will be good to me, but because he’s my only child, I think caring for me would be a big burden.” Mr Klassen believes that this attitude is common in South Korea as well. Because “many South Koreans only have one child,” he says, “parents often feel, I can’t ask a single child to take care of two, three people, so they think ‘we’re going to have to take care of ourselves’. Whether that’s really going to work out in that way remains unclear.” This is the heart of the dilemma of the Sandwich Generation, says Mr Jackson. “They’re the last generation which will fully feel this obligation to their parents, yet they haven’t prepared to the extent they need to support themselves when they’re old because they are unlikely to have the same level of support from their children.”

Key point n Members of the next Sandwich Generation—often born into smaller families than their parents—are likely to face greater burdens because they will have fewer siblings to share the demands of caring for their ageing parents.

Conclusion: a generation under pressure

hile the future prosperity of Asia’s Sandwich Generation could be altered by a number of Wforces, it is certain that Asia—and China and South Korea in particular—will undergo a massive demographic transition in the coming years that will transform their societies. With the demographic change will come fundamental shifts in the workforce. People will stay in employment longer and women will join the labour market in greater numbers. Savings and investment rates will shift as retirees draw down pensions. In macroeconomic terms most countries will see the dissipation of the “demographic dividend”—the rise in living standards that a country enjoys when the proportion of people in the working age rises. In many of the countries surveyed for this report, the Sandwich Generation will expand over the next few years as the proportion of elderly rises, but following that period it will tend to contract as the children born during years of declining fertility become adults with their own families. The falling numbers of individuals in the Sandwich Generation means only that fewer people will bear the burden of caring for ageing parents. The demands associated with that care are likely to be more severe than those faced by today’s Sandwich Generation. In the future, instead of the responsibilities being shared by several siblings, one child is likely to shoulder the demands of caring for two parents. “If you fast forward today’s Sandwich Generation into elderhood,” says Mr Jackson, “even if their kids exercise the same degree of filial piety toward their Sandwich Generation parents as today’s Sandwich Generation does towards its parents, the burden will fall on a much smaller number of children.” Knowledge of this approaching burden is growing in Asia, but some countries, having reinforced their social safety net to mitigate the challenges for the next generation, are far better prepared for the change. For the rest, tomorrow’s Sandwich Generation will feel the squeeze even more than today’s.

Appendix: survey results

NB: The following are aggregate results for all seven countries surveyed. Totals may not add up to 100 due to rounding or because respondents could pick multiple answers.

1. Please rate your level of agreement with each of the following statements. Rate on a scale of 1 to 5, where 1=totally agree and 5=totally disagree. (% respondents)

Totally agree 1 2 3 4 Totally disagree 5 I/we are currently investing in my child’s/children’s education 46 29 16 72 I/we see it as our responsibility to help our ageing parents 53 25 13 6 3 I/we do not help out our parents financially 7 8 16 25 44 I/we feel the pressure of being sandwiched between parents and children 19 20 31 15 15

2. Which of the following best describes your feelings about 5. Of the three options below, please choose the one that best your current situation of looking after both your children describes your feelings: and parents? (% respondents) (% respondents) The burden of caring for children is equally a matter of time and money We are coping 52 39 The burden of caring for children is more a matter of time than money We are struggling to cope 24 36 The burden of caring for children is more a matter of money than time We are coping well 23 24

6. Approximately what proportion of your household income is spent on your parents? (% respondents) 3. Which represents the bigger burden? 1-10% (% respondents) 46 Caring for children 11-25% 43 39 Caring for parents 26-40% 14 12 The two are equal 41-50% 43 2 More than 50% 1

4. Of the three options below, please choose the one that best 7. Approximately what proportion of your household income describes your feelings: is spent on your children? (% respondents) (% respondents) The burden of caring for parents is equally a matter of time and money 1-10% 43 8 The burden of caring for parents is more a matter of time than money 11-25% 31 41 The burden of caring for parents is more a matter of money than time 26-40% 26 33 41-50% 12 More than 50% 6

8. How do you make decisions about your savings and 9. Where do you keep your savings (ie, money you do not use investments? Choose the closest fit. for immediate living expenses)? Choose the two most (% respondents) applicable. I/we make my own decisions (% respondents) 79 Bank 79 I/we take financial advice from my banker Stockmarket (direct investment/individual shares) 6 29 I/we take financial advice from my insurance agent Insurance products 5 27 I/we take financial advice from an expert that is not tied to a bank or Property an insurance company (independent adviser) 14 4 Mutual Funds 10 I/we take advice from friends or family Pension Funds 4 7 I/we leave all the decisions to a discretionary wealth manager Not applicable—we don’t have any savings 1 2

I don’t know 1

10. Please rank the following statements describing your attitude towards financial investments other than banking products such as savings accounts and time deposits. Assign 1 for the one you like best and 7 for the one you like least. (average respondents) I/we prefer higher risk products 5.58 I/we invest in stocks or other products when I/we hear a good tip from friends/family/stockbroker 4.12 I/we prefer to invest in property 4.06 I/we occasionally invest in stocks, bonds, and other products but only with money I/we am prepared to lose 3.93 I/we prefer insured products 3.88 I/we regularly invest in non-bank financial products such as mutual funds, individual stocks, bonds, etc 3.65 I/we only put our money in no-risk products such as savings accounts, time deposits, etc 2.78

11. How has the need to look after both parents and children affected your savings (ie, the amount of money you are able to set aside after meeting living expenses)? (% respondents) I/we have had to reduce the amount we save to meet immediate living costs 36 I/we have had to spend some of our existing savings to meet immediate living costs 22 No change 16 I/we have increased our savings because we anticipate higher costs in the near term 15 I/we have stopped saving (ie, we spend all of our income each month) 9 Don’t know 2

12. How has the need to look after both parents and children affected your investments (ie, money you invest with the goal of a specific return)? (% respondents) I/we have had to reduce the amount we invest in order to meet immediate living costs 32 No change 19 I/we have had to spend some of our existing investments to meet immediate living costs 17 I/we have increased our investments because we anticipate higher costs in the near term 13 I/we have stopped investing 10 I/we have reduced the amount we invest because we anticipate higher costs in the near term 9

13. How has the need to look after both parents and children affected your attitude towards risk? (% respondents) I/we are more cautious with investments than I/we would be if we had only ourselves to look after 64 No effect 24 I/we take more risk because I/we need higher returns 12

14. Please rate your level of agreement with the following statements where 1=strongly agree and 5=strongly disagree. (% respondents) Strongly agree 1 2 3 4 Strongly disagree 5 As a result of the financial crisis I/we will need to delay our retirement 17 24 32 14 13 As a result of the financial crisis I/we probably need to work part-time post retirement 14 23 36 15 11 As a result of the financial crisis I/we have had to invest in higher risk products for potentially higher returns 7 13 33 22 25 As a result of the financial crisis our child/children may need to support themselves in further or higher education 10 23 35 18 14 As a result of the financial crisis I/we have had to adjust our lifestyle 16 28 34 14 8 As a result of the financial crisis I/we will need to rely on our children to help support us 5 11 32 21 31 As a result of the financial crisis I/we have had to seek assistance from family members 8 13 32 21 25 The financial crisis has not affected our financial situation 10 18 31 23 17

15. Based on your current situation, how do you think you will fund your retirement? Select your top three priorities. (% respondents) With a pension plan that we have chosen ourselves and to which we are currently contributing 30 With a mandatory retirement scheme to which we are currently contributing 30 Insurance annuity 30 Stocks/shares/fund dividends 25 Work part-time post retirement 24 Rental income from property 18 Company pension plan 18 With a retirement scheme to which we intend to contribute in the future 16 Our children will look after us financially 11 The government will look after us 11 16. Do you think you will be able to maintain your current No plans to retire standard of living once retired? 6 (% respondents) Don’t know No 6 42 No financial plans for our retirement Yes 4 33 We will sell our family business/rely on revenue from our family business Don’t know 3 26

17. If you are currently anticipating a shortfall of money when you plan to retire, how do you think you will rectify it? Select all that apply. (% respondents) Cut back on my lifestyle expenses when I retire 47 Cut back on my lifestyle now 41 Delay my retirement 35 Work in a different job for fewer hours or with fewer responsibilities instead of retiring 29 Rent out/sell my property 26 Expect the government to increase benefits 22 Invest in higher return (higher risk) financial products 15 Move to a lower cost country 13 Rely on my children 13 Don’t know 6

18. How do you think your costs for the following will change in the next five years? Select all that apply. (% respondents) Increase significantly Increase moderately Stay the same Decrease Not applicable Children’s education 36 42 17 41 Parents’ daily living care 11 40 43 4 1 Parents’ healthcare 22 47 27 2 1 Your own healthcare 13 42 41 3 1 Children’s healthcare 12 41 39 6 1

19. What impact does the need to look after both parents and children have on your ability to earn money? Select all that apply. (% respondents) I have had to work harder to finance my parents/child/children 36 I have had to take on an additional job 14 I can only work part-time because I need to look after my child/children 13 I have had to take on a lower paid job that gives me more flexibility over the hours I work 12 I have had to find a job to finance my parents/child/children 11 I have given up my job to look after my child/children 10 I can only work part time because I need to look after my child/children and parents 9 I have given up my job to look after my child/children and parents 7 I can only work part time because I need to look after my parents 5 I have given up my job to look after my parents 4 No impact 28

20. What is your biggest fear about the future financially? 22. In terms of additional help to care for your parents, which (% respondents) of the following apply? I/we will lose my/our jobs (% respondents) 25 We pay for a domestic helper for my parents 17 Health problems that affect my/our ability to work We pay for a professionally qualified helper for my parents 19 13 My/our parents are in a care institution Another financial crisis that would erode my/our savings 6 15 None of the above My/our children will need more financial support as they go to 64 university/college 15

My/our parents will require expensive medical care 8 My/our children will be unable to find jobs and will require financial 23. In terms of time spent caring for or arranging care for your support into adulthood children, which one of the following best describes your 6 situation? I/We will have to fully support ourselves rather than relying on (% respondents) our children I do most of the work 4 35 My spouse and I share the burden equally Who bears the burden 34 4 My spouse does most of the work Our child /children will not look after us the way that we look after 20 our parents My parents help out 2 8 My/our siblings help out Our only child will not be able to support both of us 1 3

24. In terms of additional help to care for your children, which of the following apply? (% respondents) 21. In terms of time spent caring for or arranging care for your We send our children to a day care centre parents, which one of the following best describes your 22 situation? We pay for a domestic helper for our children (% respondents) 17 I do most of the work None of the above 34 61 My spouse and I share the burden equally 31 My/our siblings share the burden equally 16 My spouse does most of the work 25. Approximately how many hours a week do you/your spouse 11 spend caring for your parents? My/our siblings do most of the work (% respondents) 6 0-10 50 My child/children helps out 1 11-20 30 21-30 12 31-40 4 More than 40 4

26. Approximately how many hours a week do you/your spouse spend caring for your children? (% respondents) 0-10 10 11-20 19 21-30 24 31-40 13 More than 40 34

27. Please rate your agreement with the following statements on a scale of 1 to 5, where 1=totally agree and 5=totally disagree. (% respondents) Totally agree 1 2 3 4 Totally disagree 5 I expect to look after my parents as they get older 37 36 23 32 I expect my children to look after me when I get old 13 23 39 19 7 I expect to look after my children until they are in their mid-twenties 26 32 27 10 4 I expect to look after myself when I get old 34 34 25 5 3 I expect my spouse rather than my child/children to look after me when I get old 22 31 31 10 6 My friends and I will take care of each other as we get old 12 19 33 17 19 The community will look after me when I get old 7 13 33 24 24 The government will look after me when I get old 12 16 30 21 21

28. Which of the following statements do you most agree with? Choose one. (% respondents) Families should bear the primary financial responsibility for looking after the elderly 32 Governments should financially support individuals and families in looking after the elderly 28 Individuals should bear the primary financial responsibility of looking after themselves when they get old 28 Governments should bear the primary financial responsibility of looking after the elderly 12

29. In terms of planning for retirement, who do you think 33. What is your total annual household income? Hong Kong: should have primary responsibility? (% respondents) (% respondents) Under HKD 200,000 The government, with a defined contribution pension plan 16 55 HKD 200,000–HKD 300,000 Individuals, with private pension plans 26 44 HKD 300,001–HKD 400,000 Other, please specify 22 1 HKD 400,001–HKD 500,000 17 Over HKD 500,000 19 30. In which country are you personally located? (% respondents) Taiwan 15 China 34. What is your total annual household income? Japan: (% respondents) 14 Under JPY 4,000,000 Australia 10 14 JPY 4,000,000–JPY 6,000,000 Hong Kong 34 14 JPY 6,000,001–JPY 8,000,000 Japan 27 14 JPY 8,000,001–JPY 10,000,000 Singapore 14 14 Over JPY 10,000,000 South Korea 15 14

31. What is your total annual household income? Australia: 35. What is your total annual household income? Singapore: (% respondents) (% respondents) Under AUD 75,000 Under SGD 40,000 45 15 AUD 75,000–AUD 100,000 SGD 40,000–SGD 60,000 25 22 AUD 100,001–AUD 125,000 SGD 60,001–SGD 80,000 17 25 AUD 125,001–AUD 150,000 SGD 80,001–SGD 100,000 7 16 Over AUD 150,000 Over SGD 100,000 7 22

32. What is your total annual household income? China: 36. What is your total annual household income? South Korea: (% respondents) (% respondents) Under RMB 50,000 Under KRW 50,000,000 15 42 RMB 50,000–RMB 100,000 KRW 50,000,000–KRW 70,000,000 35 37 RMB 100,001–RMB 150,000 KRW 70,000,001–KRW 90,000,000 27 15 RMB 150,001–RMB 200,000 KRW 90,000,001–KRW 110,000,000 19 6 Over RMB 200,000 Over KRW 110,000,000 4 0

37. What is your total annual household income? Taiwan: 41. Which of the following best describes the occupation of the (% respondents) main earner in the household? Under TWD 750,000 (% respondents) 19 Manager TWD 750,000–TWD 1,000,000 23 35 Professional (doctor, lawyer, etc) TWD 1,000,001–TWD 1,250,000 19 15 Senior manager TWD 1,250,001–TWD 1,500,000 12 7 C-Level/director level executive Over TWD 1,500,000 5 24 Entrepreneur/business owner 5 Other 36

38. What is your marital status? (% respondents) Married 89 Single 42. How old are the parents being supported by you? 11 (% respondents) Under 60 21 60-70 45 39. In which age group do you belong? 71-80 (% respondents) 25 Under 30 15 Over 80 8 30-35 30 36-40 22 41-45 16 43. What is the size of your household? - Number of children (% respondents) 46-50 1 11 49 51-60 2 6 38 Over 60 3 0 9 4 3 More than 4 40. How many children do you have? 0 (% respondents) 1 49 2 40 More than 2 12

44. What is the size of your household? - Number of 47. What is the size of your household? - Number of relatives grandparents (wife’s parents) (excluding parents) (% respondents) (% respondents) None 1 21 18 1 2 25 11 2 3 54 14 4 16 5 7 6 45. What is the size of your household? - Number of 5 grandparents (husband’s parents) 7 (% respondents) 1 None 51 8 2 1 21 9 1 2 27 10 or more 25

46. What is the size of your household? - Number of maids 48. How old are the children in the household? (% respondents) (respondents) None Under 10 years 73 640 1 10-14 years 19 270 2 15-18 years 3 117 3 Over 18 years 1 140 4 or more 4

49. What is your gender? (% respondents) Male 50 Female 50

38 © Economist Intelligence Unit 2010 Whilst every effort has been taken to verify the accuracy of this information, neither The Economist Intelligence Unit Ltd. nor the sponsor of this report can accept any responsibility or liability for reliance by any person on this report or any of the information, opinions or conclusions set out herein. Fidelity, Fidelity International, and Fidelity International and Pyramid Logo are trademarks of FIL Limited and are used with its permission.

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