feeling the squeeze: asia’s sandwich generation

LONDON26 Red Lion SquareLondonWC1R 4HQUnited KingdomTel: (44.20) 7576 8000Fax: (44.20) 7576 8500E-mail: [email protected]

NEW YORK750 Third Avenue5th FloorNew York, NY 10017, USTel: (1.212) 554 06000Fax: (1.212) 586 0248E-mail: [email protected]

GENEVABoulevard des Tranchées 161206 GenevaSwitzerlandTel: (41) 22 566 2470Fax: (41) 22 346 93 47E-mail: [email protected]

HONG KONG6001, Central Plaza18 Harbour RoadWanchaiHong KongTel: (852) 2585 3888Fax: (852) 2802 7638E-mail: [email protected]

Paper size: 210mm x 270mm

A report from the Economist Intelligence Unit

Sponsored by

Feeling the squeezeAsia’s Sandwich Generation

C

M

Y

CM

MY

CY

CMY

K

Cover_final.pdf 7/9/2010 1:36:36 PMCover_final.pdf 7/9/2010 1:36:36 PM


© Economist Intelligence Unit 2010 1

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

Childrencomefirst 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

Reelingfromthefinancialcrisis 22

Adearthoffinancialadvice 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


2 © Economist Intelligence Unit 2010

Disclaimer

©2010TheEconomistIntelligenceUnit.Allrightsreserved.Allinformationinthisreportisverifiedto 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.



Preface

Feeling the squeeze: Asia’s Sandwich Generation is an Economist Intelligence Unit report, sponsored by FidelityInternational.Thefindingsandviewsexpressedinthisreportdonotnecessarilyreflecttheviewsof the sponsor.

Thereport’squantitativefindingscomefromasurveyof700respondentsinAsia,conductedinApriland 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


4 ©EconomistIntelligenceUnit2010

Executive summaryThe 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, thechallengestheyface,theimpactofprovidingformultiplegenerationsontheirfinancialsituationand 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,financialprofessionalsandmembersoftheSandwichGenerationthemselves.TheresultsshowthatmembersofAsia’sSandwichGenerationaretypicallybetweentheagesof30and45,married,and supporting one or two children and two parents or parents-in-law. Across the countries surveyed, thiscohortisanestimated20%oftheworking-agepopulation(definedasbetween21and70forthepurposes of this report).

Thekeyfindingsofthereportareasfollows:

• 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, inAsiatheSandwichGeneration’ssenseoffilialobligationremainsstrong,with78%agreeingthatitistheir 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



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. SandwichGenerationmembersinChinaandHongKongfindthemselvesspendingmoreontheirparentsthan 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 Generationarecontributingtopublicandprivatepensionsorinsurancepolicies,but42%overallexpecttheir 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 thatpublicbenefitswillincreaseinthefuture.Regardlessoftheirprojectionsforthefuture,fewAsianSandwichGenerationmembers(16%)seekprofessionaladviceinfinancialplanning.

• 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.



Introduction: sandwiched between young and old

In 1981, sociologist Dorothy Miller coined the expression “the Sandwich Generation” to identify a segment of the population of middle-aged adults caring for their children as well as their ageing

parents.Whilesomeexpertsdebatethefinerpointsofthedefinition—suchaswhetherone’schildrenmust 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 workforceinAsia“sandwiched”betweengenerations?Culturalpreceptsstressingfilialpietymeanmany

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

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

3,500,000

205020452040203520302025202020152010200520001995199019851980197519701965196019551950

0-14 15-60 60+

Figure 1Asia: population by age group: 1950-2050

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

200,000

250,000

300,000

350,000

2045-20502040-20452035-20402030-20352025-20302020-20252015-20202010-20152005-20102000-20051995-2000

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

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.



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.

Inaddition,Asiaisexpectedtoundergosignificantdemographicchangeofthekindalreadyexperienced 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).

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

1

2

3

4

5

6

20502045204020352030202520202015201020052000199519901985198019751970196519601955

Asia Europe North America

Figure 3Total fertility: 1955-2050

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

40

45

50

55

60

65

70

75

80

85

205020452040203520302025202020152010200520001995199019851980197519701965196019551950

Asia Europe North America

Figure 4Dependency ratio: 1950-2050

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).Thoughonamacroeconomicleveltheburdenwillbebornebyallhouseholds,thoseintheSandwichGenerationwillbearthegreatestweight,financialandotherwise.Manyofthemfacethechallengesofcaring for three generations—their parents, themselves and their children—without much assistance in the form of social security or public healthcare.

HowaremembersofthiscohortinAsiacopingtoday?Whatsacrificeshavetheyhadtomake?Whatimplications does their position have for their own retirement?



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-depthinterviewswithexpertsonregionaldemographics,financialprofessionalsandindividualsinthesurveyed regions who identify themselves as members of the Sandwich Generation.

How large is Asia’s sandwich generation?The EIU estimates that an average of 20% of the working-age population1 across China, Japan, Hong 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

About the research

For this report the Economist Intelligence Unit surveyed 700 individuals in Australia, China, Hong Kong, Japan, Singapore, South Korea and Taiwan (100 percountry).Surveyfindingsfor“Asia”inthisreportrefer to aggregate results across these countries. Survey respondents were between the ages of 21 and 70 and supporting at least one child and one parent, financiallyorotherwise.(Althoughthisagegroupwas selected to capture the widest possible range of Sandwich Generation members, the results showed onlyatinyminority—0.4%—ofallrespondentswereaged over 60.) Both sexes were equally represented.

The survey sample included only people who fall intothe“ABC1”socioeconomicclassification(thatis,“middle class” workers earning local median income levels and above, or with comparable purchasing power). In conducting the survey, the principal goal was to ascertain how the burden of supporting parents and children affects the decisions of working-age adults in relation to their disposable income and investment/saving behaviour. Low-income earners typicallydonothavethefinancialmeanstosupportmultiple generations, nor are likely to alter their investment, saving or retirement planning (if any) given the burden of caring for multiple generations. As such they are not considered as part of the Sandwich Generation in this report.

Figure 5Asia’s Sandwich Generation

CountryTotal

populationWorking-age population*

Prevalence of Sandwich Generation in working-age

population**Implied number of people in

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 ofSandwichGenerationmemberis0.4%.** 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).

1 Definedinthisreportas between the ages of 21 and 70.



37% of the working-age population is supporting multiple generations. The Sandwich Generation is a significantcohortinHongKongandSingaporetoo,makingupanestimated27%and26%respectivelyofthe 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

Japan and Australia have the smallest Sandwich Generation of the countries surveyed, accounting for only 6% of the working-age population in both places: a result, perhaps, of the well-developed social securitysystemsinthosecountriesthatprovidemoregenerouspensionsandrelievesomeofthefinancialburden of caring for the elderly. Cultural factors (in Australia’s case) and these countries’ relative wealth may also be explanatory factors. In addition, Japan’s longevity and the health of its senior population is another factor, with many people supporting themselves long enough to avoid sandwiching their offspring between generations.

ThetypicalmemberofAsia’sSandwichGenerationisbetweentheagesof30and45,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. Theyalsofeelastrongsenseofresponsibilitytocarefortheirageingparents,andtheburdentofinancethat 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.

2 “Baby Boomers Approach Age 60: From the Age of Aquarius to the Age of Responsibility”, Pew Research Center,2005.Thesefindingsrefer to “baby boomers”, Americansaged41-59.Themedian household income of this group is higher than that of all other American adults.



1. Family responsibilities

The phenomenon of caring for multiple generations is as old as the family itself, but Asia’s demographic transition 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 tocarefortheirageingparents,andtheirwillingnesstoprovidetheirparentswithphysicalandfinancialsupport. 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 theSandwichGenerationiswillingtospendsignificanttimeandresourcestoensuretheyhaveeveryadvantage to succeed.

Filial valuesConfucianidealsholdfilialpiety,orrespectforone’sparentsandenduringdutifulnesstothem,asthehighest virtue. It is therefore not surprising that despite rapid modernisation, shrinking family size, growingdemandsontheirwalletsandtheincreasinginfluenceofindividualistic“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 agree that it is their responsibility to help their ageing parents.

This sentiment is strongest in China, where 87% of respondents feel responsible for their parents’ care. Kwok Hong-Kin, assistant professor ofsociologyandafellowattheAsia-PacificInstituteofAgeingStudiesatLingnan University in Hong Kong, highlights the enduring strength of this responsibility: “Filial piety in Chinese society is still very, very strong”, he says. “It is clear from my research that, no matter their age, the Chinese have a strong sense of responsibility to look after their parents.”

Members of the Sandwich Generation in China are also spending more time caring for their parents than their Asian peers, and are second only to Hong Kong in how much of their income they spend on their parents, a function of China’s lack of social insurance or long-term care for the elderly (discussed

“Singapore is still dominated by Asian values. Children recognize theirfilialdutiesand feel it is their responsibility to care for their parents.” —Tan Ern Ser, Associate Professor of Sociology, National University of Singapore

Key points

n Sandwich Generation members, and the Chinese in particular, feel a strong sense of obligation to care for their ageing parents.

n Whilechildrenaretheirtoppriority,manyspendasignificantportionoftheirtimeandmoneycaringfortheirparents.



furtherinChapter2).Whileonaggregate69%ofsurveyrespondentsarehelpingtheirparentsfinanciallyin 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 filialdutiesandfeelitistheirresponsibilitytocarefortheirparents.”

InSouthKoreaitisnotonlyfilialobligation,butalsoasenseofgratefulnessthatunderpinstheSandwich 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 Generationfeelsakindofobligationtotakecareoftheirparentsbecauseofthesacrificesthosepeoplemade.”

Strong bonds between parents and children and feelings of obligation to care for one’s parents as they agearenotuniquetoAsia.ButtheabidingstrengthoffilialpietyinAsiancultures,combinedwiththeabsence 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 moretimecaringfortheirchildrenthantheirparents,asmaybeexpected.Morethanone-third(34%)ofpeoplesurveyedspendover40hoursperweekcaringfortheirchildren,andanother37%spendbetween20and40hours.Butthevastmajorityofrespondents,80%,spendlessthan20hoursperweekcaringfortheir parents (Figure 6).

More than 40

21-30

11-20

344

4

24

1930

50

31-4013

12

0-1010

Figure 6Hours per week spent caring for family members (Asia)(% respondents)

Children Parents

Source: Economist Intelligence Unit survey

More than 50%

26-40%

11-25%

61

2

33

4139

46

41-50%12

12

1-10%8

Figure 7Proportion of income spent on family members (Asia)(% respondents)

Children Parents




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).

Sandwichgenerationmembersarequiteclearthattheirchildrencomefirstwhenitcomestotheirresources. 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,wealwaysplantosaveforhim.Wethinkofhimfirstandmakesurehe’sgotenoughmoneyforhiseducation before we think about our leisure or travelling.”

According to Anne Tay, vice president of wealth management at OCBC Bank in Singapore: “Members oftheSandwichGenerationfacethreecompetingdrainsontheirfinancialresources:themselves,theirparentsandtheirchildren.Iftheyhavejustonedollartospend,itwillgoontheirchildren.Iftheyhavetwo dollars to spend, the second dollar goes on parents. If they have three dollars, the third will be spent on themselves.”



2. Financial pressure

Supportingparentsandchildrensimultaneouslyposesdauntingfinancialchallenges.While63%ofrespondents 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 8How is Asia’s Sandwich Generation coping?(% respondents)

AsiaWe are struggling to cope We are coping We are coping well

Australia

China

Hong Kong


3936 24

5035 16

1645 39

2853 19

Japan3930 31

Singapore5621 23

South Korea6026 14

Taiwan2942 29

Education is a priorityEducationisamajorexpensefortheSandwichGeneration:75%ofitsmembersarecurrentlyinvestingintheir 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 countrieswithConfucianinfluencesuchasSouthKoreaorJapan,”saysChin-ChunYi,aresearchfellowfocusing 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

Key points

n Many Sandwich Generation members report struggling to cope under the pressure of supporting parents and children,andmostexpectfamilyexpensestoincreaseoverthenextfiveyears.

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 limitedaccesstopublicbenefitsthatwouldhelpoffsetthecostoftheircare.



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 privateschool,feelsthepressurehefacesissignificant.“KidsinHongKonghavetocompetewithallthe 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,thechoicebetweenpublicandprivatefeesisnotasclear,butthefinancialburdencanbeequallysteep.MrKwokofLingnanUniversitysaysthatinChinaparentsmustoftenforkoversignificant“donation fees”, amounting to thousands of US dollars, to secure their children’s places in respected schools.“InsomebigcitieslikeShanghai,GuangzhouandBeijing,ifthechildrenareadmittedtoafamous 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,sayshisfamily’smostsignificantfinancialcommitmentishissix-yearoldson’seducation.“Ithink 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]eachtime.”

Mr Zhang is not alone in funding educational extras for his child. In addition to school fees, expenses related to tutors, sports and music lessons, extracurricular activities, and any number of activities that boost children’s chances of being admitted to a prestigious university add up. In Taiwan, where 91% of respondents (compared with 75% overall) are investing in their children’s education, it is the norm for students to spend hours in after-school tutoring programs. “If you want to apply to better colleges and enroll in good majors,thecompetitionisfierce,”saysJu-PingLin,associateprofessorofhuman development and family studies at National Taiwan Normal University.

ThesameistrueinSouthKorea.“EducationisjustsoimportantinKoreabecause it’s a country without any natural resources, so the only resource it 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

“Now there are also growing numbers of young people living with their parents well into their late 20s or even early 30s.”—Ju-Ping Lin, Associate Professor of Human Development and Family Studies, National Taiwan Normal University



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 prolongedadolescencesuggeststhatevenpeoplewhoseparentsareself-sufficientwhentheirchildrenare young may nonetheless end up members of the Sandwich Generation after their children have completed university.

Parents cost money tooWhile 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 ontheirfinancialresources.Thirty-ninepercentofAsia’sSandwichGenerationmembersarespending

between 11% and 25% of their income caring for their parents.

In Hong Kong and China people are spending even more. Fifty-two percent of Chinese respondentsand49%ofHongKongrespondentsspend between 11% and 25% percent of their income on their parents, and 23% of Hong Kong respondentsspendbetween26%and40%,compared with 12% overall (Figure 9). The lack of fully developed pension schemes in many countriesinAsiaisamajorcontributortotheSandwich Generation’s dual burden of maintaining parents and children, and it may explain the higher expenses the Sandwich Generation faces in Hong Kong and China.

In Hong Kong a means-tested old-age pension is available for the elderly poor, but the income and assets of all family members with whom the

Figure 9Proportion of income spent on parents(% respondents)

Asia China Hong Kong


11-25%

26-40%

41-50%

3952

49

1216

23

212

1-10%46

3025

More than 50%111



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 HongKongBaptistUniversity.“Norareyouqualifiedtosendyourparentstoagovernment-operatedelderly 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) inWashingtonDC.“Notjusttheoldagepartofit,buthealthcareandunemploymentandeverythingelse.”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 of those who have no pensions are largely paying for their parents’ care from their own pockets.3

In South Korea the situation is quite similar. “Since our government sponsored long-term care 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, to contribute to the cost of their care, and although means-tested welfare is available,only14%ofelderlySouthKoreansreceivedbenefitsin2005,andthosebenefitsaveragedlessthanUS$80permonth.4

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. Almost three-quarters (73%) of Japanese Sandwich Generation members spendunder10%oftheirincomeontheirageingparents,comparedwith46%overall who spend this much. Japan’s case differs from that of many of the other countries surveyed in that it has a generous system of social assistance for the elderly. Long-term care insurance covers about 90% of the cost of health care for people over 65 years old.5 Many of Japan’s elderly retirees are also supported by generous company pensions, earned during the years of rapideconomicgrowth.Eveniftheyarenot,manyarefitenoughtosupport

3 “China’s Long March to Re-tirement Reform”, Center for Strategic and International Studies, 2009.

4 “The Aging of Korea”, Center for Strategic and Interna-tional Studies, 2007.

“The relationship between the middle generation and their parents is actually reciprocal. While they provide financialsupporttotheir parents, their parents also help do house chores and, most important of all, help nurse the kids.”—Chin-Chun Yi, Research Fellow, Academia Sinica

5 Ministry of Health, Labour and Welfare, Japan: http://www.mhlw.go.jp/english/ topics/elderly/care/2.html.



Japan: an ageing outlier

When it comes to the pressures exerted by an ageing society, Japan could be expected to face the most daunting challenges in Asia. Japan’s over-60 age group counts for 30% of its total population; 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 of elderly, its Sandwich Generation is the smallest of the regions surveyed: only 6% of Japan’s working-age population, compared with 27% in Hong Kong, report that they are sandwiched between parents and children.

According to Hiroko Akiyama, professor at the Institute of Gerontology at the University of Tokyo, the Sandwich Generation phenomenon never became an issue affecting large numbers of people in Japan, despite predictions to the contrary. The combination of longevity and good healthcare for Japanese citizens—which includes long-term care for the elderly—has largely insulated working-age Japanese from the demands of simultaneously caring for parents and children.

Japanese women may have the longest lives in the world (86) and Japanesementhe4thlongest(79)7 but they also remain healthy late in life. For 80% of Japanese men and women, it is only in their mid-70s that they begin to require some assistance in their daily lives.8 Thus, the elderly are more capable of remaining independent of their families’ care than elsewhere. “By the time one faces the need to care for parents in Japan, it is likely that one is already done raising children,” says Professor Akiyama.

In addition, comprehensive public healthcare and access to long-term care (Kaigo Hoken)serviceshelptorelievethefinancialandtime burdens on working-age adults of caring for parents. “In the past, nursing care was socially imposed almost entirely on women, but there is now the option to make use of the long-term care insurance scheme,” Professor Akiyama says. “A lot of people do use this while they continue working.” In other parts of Asia, like China and Hong Kong, people cannot turn to comparable social services to assist them in caring for their ageing parents.

These factors may explain why the Japanese Sandwich Generation spends the least amount of time and money caring for its parents among those surveyed. While on aggregate, 51% of Asian

SandwichGenerationmembersspendbetween11%and40%oftheirincomeontheirparents,themajorityofJapanesespendlessthan this, with 73% of Japanese spending only up to 10%. Similarly, 78% of Japanese respondents report spending 1-10 hours per week caring for parents, compared with an average of 50% of respondents across Asia who spend this amount of time (Figure 10).

6 “Population Ageing and Development”, United Nations Department of Economic and Social Affairs/Population Division, 2009.

7PopulationprojectionsforJapan(asofDecember2006),NationalInstituteofPopulation and Social Security Research, Japan.

8 Hiroko Akiyama, “Conceptualising science and society in the age of longevity”, Science Journal Kagaku, Vol. 80 No. 1, January 2010, Iwanami Shoten.

a) What proportion of your income is spent on your parents?

b) How many hours per week do you/your spouse spend caring for your parents?

Figure 10Time and money spent on parents(% respondents)

More than 50%

26-40%

11-25%

1

1

1

2

10

1539

46

41-50%

12

1-10%73

Japan Asia

More than 40

26-40

11-25

0

1

4

4

6

1530

50

41-50

12

0-1078

Japan Asia




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 middlegenerationandtheirparentsisactuallyreciprocal.Whiletheyprovidefinancialsupporttotheirparents, 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,” hesays.“Myparentspaidthedownpayment—50%oftheoverallprice—forourfirstapartment10yearsagowhenIfirstmovedtoShanghai.”

Costs are expected to go upTheSandwichGenerationisclearlyfacingsignificantexpensestomaintaintheirchildrenandparents,and they expect these costs to go up in the near term. Overall, 78% of respondents believe that the cost of theirchildren’seducationwillincreaseoverthenextfiveyearsand69%believethesameoftheirparents’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 11Rising costs expected over the next 5 years(% respondents)

AsiaChildren’s education

Increase significantly Increase moderately Stay the same Decrease

Parents’ daily living care

Parents’ healthcare

Your own healthcare

174236 4 1

4011 1443

22 122747

414213 13

Children’s healthcare394112 16

Not applicable

SingaporeChildren’s education

Increase significantly Increase moderately Stay the same Decrease



Your own healthcare

113751 1

4720 231

26 1955

334718 2


Not applicable




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.



3. Working harder, saving less

As a result of the demands of caring for both parents and children, the Sandwich Generation is working harder. More than one-third (36%) of those surveyed say they have to work harder to pay for the care

oftheirfamilies,andanother14%havetakenonadditionaljobs.MrZhang,whoisoverseeingthelaunchof 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. Almosthalf(49%)havealsoreducedtheamountstheyinvestorliquidatedinvestmentsforthesamereason.

Figure 12Caring for parents and children means ...(% respondents)a) Savings (Asia)I/we have had to reduce the amount we save to meet immediate living costs

I/we have had to spend some of our existing savings to meet immediate living costs

No change

36

22

16

I/we have increased our savings because we anticipate higher costs in the near term15

I/we have stopped saving (ie, we spend all of our income each month)9

b) Investment (Asia)I/we have had to reduce the amount we invest to in order to meet immediate living costs

I/we have had to spend some of our existing investments to meet immediate living costs

I/we have stopped investing

32

17

10

I/we have increased our investments because we anticipate higher costs in the near term13

I/we have reduced the amount we invest because we anticipate higher costs in the near term9

No change


19

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.



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 risksWith the money they do manage to save and invest, the Sandwich Generation is taking fewer risks. Most respondents(64%)saytheyaremorecautiouswithinvestmentsthantheywouldbeiftheyonlyhadthemselves 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 13Sandwich 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

No effect

I/we take more risk because I/we need higher returns


64

24

12

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,whoworksinthefinancialindustry,“willnotput[oursavingsinto]riskyinvestmentsbecausehe knows that we have somebody at home that we need to take care of”.

SandwichGenerationmembersmayselectsavingsvehiclesthattheyareconfidentwillbothprotecttheir 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 ofHongKongrespondentsand40%ofthoseinChinanamedthestockmarketamongtheirtoptwosavingslocations, compared with 29% overall, suggesting that these Sandwich Generation members have a higherrisktolerancethansomeoftheirAsiancounterparts(Figure14).

In this respect, these investment preferences are representative of broader trends in China. “I think there’sasortofinvestmentmentalityinChinawherepeopleputthemajorityoftheirsavingsintosomething 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 also missing an investment strategy. “Investment in the stockmarket tends to be very short-term, very speculative and very emotionally driven,” she says. “Some investors look at underlying fundamentals, but many are driven by sentiment in the broader market. When investors buy into the stockmarket, they don’t tend to be long-term ’buy and hold‘ investors.”

South Korean Sandwich Generation members are more sceptical about putting their money in stocks and shares. “They have seen the Korean stockmarket repeatedly fail to yield high returns, even in the long run,” says Mr Kang. “Their portfolio consists of high-risk, high-return real estate investmentsandsafefinancialinvestments.”

MrKlassencallsthisatwo-partsavingsplan.Thefirstpartistopurchasea house. But “housing is a relatively risky investment, so they compensate by taking any other cash and puttingitintotheseconservativefinancialinstruments”,likeinsuranceproducts.Insuranceproductsalso 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 crisisThe Sandwich Generation’s relatively conservative views on investing may have been reinforced by the globalfinancialcrisis,whichnegativelyaffectedthefinancialsituationof40%ofthosesurveyed.Asaresultofthecrisis,41%ofpeoplepolledwillneedtodelayretirement,44%haveadjustedtheirlifestylesand 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.

Singaporeistypical,with40%ofSandwichGenerationmemberssayingthatthefinancialcrisishadaffectedtheirfinancialsituation,51%sayingtheywillhavetodelaytheirretirementasaresultand55%sayingtheyhavehadtoadjusttheirlifestyle.Theirinvestmentpreferenceshavealsochanged,accordingtoMsTay:“Whenitcomestochoosinginvestmentvehicles,Singaporeanshaveafirmpreferenceforphysical, tangible assets. That means property. This is the case generally, but this preference has increasedsincethefinancialcrisisstruck.Thecrisishashitpeople’sconfidenceinpaperorfinancialassets.”

“In Singapore investment in the stockmarket tends to be very short-term, very speculative and very emotionally driven.”—Anne Tay, Vice-president, Wealth Management, OCBC Bank



Figure 14Sandwich Generation’s top two savings locations(% respondents)

Asia Australia China Hong Kong Japan Singapore South Korea Taiwan


Bank

Property

Insurance products

Stockmarket (direct investment/individual shares)

Mutual funds

Pension funds

6394

8480

66

79

29

27

1417

1914

810

1713

105

137

84

1318

77

96

46

9

24

0

03

21

3

10

521

3121

3434

42

940

4817

2926

31

8583

Not applicable—we don’t have any savings



A dearth of financial adviceDespite the fact that they face mounting costs in caring for their families, declining savings and investment rates, and for the most part receive low rates of return on the investments they do make, very few members of the Sandwich Generation in Asia seek the advice of professional advisers increatingafinancialstrategy.FouroutoffiveSandwich Generation members make their own decisions about savings and investments. Only 16%relyonthecounseloffinancialorinsuranceprofessionals (Figure 15).

One reason for this may be sensitivity about revealing personal information to relative strangers.“Singaporeans,onthewhole,arereluctanttodiscusstheirpersonalwealthandfinanceswithstrangerslikeIFAs[independentfinancialadvisers],”saysMsTay.“Iftheyhaveafriendwhoisfinanciallywell-educated,theywillseekhimorheroutratherthananunknownprofessional.”Attitudesin 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 veryconservative,wedon’ttrustpeopleeasilyandwedon’tconsultfinancialadvisersasreadilyasWesterners.”

MrWangofChinaMerchantsBanksaysinChinainvestorsarealsoscepticalthatfinancialadvisershave much insight to offer. “The Chinese stockmarket, as everybody knows, plays quite a lot on [inside] information,sotheydon’treallyappreciatetheadviceofprofessionalfinancialadvisers.”Rathertheywilllook to those who they believe have the kind of information they need.

Onthisbasis,itisnotentirelysurprisingtofindthat,overall,mutualandpensionfundsrankatthebottomofrespondents’preferredsavingsvehicles,with10%and7%respectivelyusingthesefinancialproducts 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 peopleintheir40-50swhomayneedtoseekexternalhelponwealthdevelopment”,saysMsJun.“Theychoosesavinginbankdepositsratherthanotherfinancialvehiclesbecausetheyneedtodoso.”

Figure 15How does the Sandwich Generation make decisions about savingsand investments? (Asia)(% respondents)I/we make my own decisions

I/we take financial advice from my banker

I/we take financial advice from my insurance agent

79

6

5I/we take financial advice from an expert that is not tied to a bank or an insurance company (independent adviser)

4

I/we take advice from friends or family4

I/we leave all the decisions to a discretionary wealth manager

1




4. A happy retirement?

With all the large expenses facing members of the Sandwich Generation—expenses that they may be coveringfortwoorthreedecades—itisnotsurprisingtofindthatmanypeopleareworriedabout

theirfuturefinancialsecurity.Tobesure,theyhaveconsideredhowtheywillfundtheirretirement,andmost are actively saving for it, either through private pension contributions, public pension contributions orinsurancepolicies.Butmany(42%overall)expect their standard of living to decrease once they leave the workforce (Figure 16).

The pessimistsSouth Korean and Japanese members of the Sandwich Generation are the most pessimistic about their retirement futures, with 61% and 57% respectively reporting that they do not think they 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 andpersistentdeflation.

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 verylowreplacementrate.AndmostKoreanfirmsforcetheiremployeesretireatage55,”saysMrKangof 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 employersbasicallyfiring—wecancallit’mandatorilyretiring’—workersintheir50s,”saysMrKlassen.There are a number of reasons for the low retirement age, including the fact that older Korean employees

Figure 16Sandwich Generation retirement expectations (Asia)Do you think you will be able to maintain your current standard of living once retired?(% respondents)No

Yes

Don’t know


42

33

26

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.



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,butforlessmoney.“Nowtheydon’tretirepermanently,theystartasecondjobasataxidriver,as a security guard, or, if they’re lucky, they’ll open a restaurant,” says Mr Klassen. “So they’re going to go fromjobswherethey’rewellpaid,andtheyhaveallkindsofsafety-nets,intopart-timeortemporarytypesof employment. And at the same time they’re probably still going to have a child or children in university becausetheyarejustintheir50s.Ontopofthis,they’regoingtohavetheirownparentswhoaregoingto 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 optimistsThemoodisverydifferentamongChineseSandwichGenerationmembers,themajorityofwhom(58%)believe they will indeed maintain their current standard of living into retirement, a result perhaps not as surprisingasitmayfirstappear.Afterall,manyofthemembersofChina’sSandwichGenerationcameofage 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 after year, as it has done their whole adult lives.

The growth that they are counting on to maintain their living standards may over time undercut the savings they are making today. Even though today’sSandwichGenerationis“savinghandoverfist”,saysMrJacksonofCSIS, these savings are going into bank deposits “where the real rate of return is zero or negative. You have wages and the cost of living growing very rapidly, you have people trying to prepare for the future by undertaking all of this precautionary and retirement savings, but it’s all earning such a low rate of return that it’s not going to buy them much 15 or 20 years from now. So they 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 nearfuturewillensuretheircomfortseveraldecadesfromnow.AmajorityofrespondentsinChina,51%,expectthegovernmentwillincreasesocialbenefits—farhigherthanthe22%onaggregatewithasimilarexpectation. 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.”

“China’s Sandwich Generation may be in a position where they really are depending as much or more than today’s elderly on their children.”—Richard Jackson, Director, Global Aging Initiative, Center for Strategic and International Studies



From doting to dotageHalf 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 notablethatoutsideofChinaandHongKong(where48%ofparentsarelookingtotheirchildrenforcarein 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 providegoodopportunitiesforhimtogrow,sothathewillgetagoodjobandhaveabrightfuture.Ifthat’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 facesignificantpressuresofhisownasanadult,andtoavoidcompoundingthosepressuressheandherhusband 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.”



Conclusion: a generation under pressure

While the future prosperity of Asia’s Sandwich Generation could be altered by a number of forces, 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 willjointhelabourmarketingreaternumbers.Savingsandinvestmentrateswillshiftasretireesdrawdown pensions. In macroeconomic terms most countries will see the dissipation of the “demographic dividend”—theriseinlivingstandardsthatacountryenjoyswhentheproportionofpeopleintheworking 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 exercisethesamedegreeoffilialpietytowardtheirSandwichGenerationparentsastoday’sSandwichGeneration 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.

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.

AppendixSurvey results



Appendix: survey resultsNB: 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)

I/we are currently investing in my child’s/children’s educationTotally agree 1 2 3 4

I/we see it as our responsibility to help our ageing parents

I/we do not help out our parents financially

I/we feel the pressure of being sandwiched between parents and children

162946 7 2

2553 3613

87 442516

312019 1515

Totally disagree 5

2. Which of the following best describes your feelings about your current situation of looking after both your children and parents? (% respondents)We are coping

We are struggling to cope

We are coping well

39

36

24

3. Which represents the bigger burden? (% respondents)Caring for children

Caring for parents

The two are equal

43

43

14

4. Of the three options below, please choose the one that best describes your feelings: (% respondents)The burden of caring for parents is equally a matter of time and money

The burden of caring for parents is more a matter of time than money

The burden of caring for parents is more a matter of money than time

43

31

26

5. Of the three options below, please choose the one that best describes your feelings: (% respondents)The burden of caring for children is equally a matter of time and money

The burden of caring for children is more a matter of time than money

The burden of caring for children is more a matter of money than time

52

24

23

6. Approximately what proportion of your household income is spent on your parents? (% respondents)1-10%

11-25%

26-40%

46

39

12

41-50%2

More than 50%1

7. Approximately what proportion of your household income is spent on your children? (% respondents)

11-25%

26-40%

41-50%

41

33

12

1-10%8

More than 50%6




8. How do you make decisions about your savings and investments? Choose the closest fit. (% respondents)I/we make my own decisions

I/we take financial advice from my banker

I/we take financial advice from my insurance agent

79

6

5I/we take financial advice from an expert that is not tied to a bank or an insurance company (independent adviser)

4

I/we take advice from friends or family4

I/we leave all the decisions to a discretionary wealth manager

1

I don’t know1

9. Where do you keep your savings (ie, money you do not use for immediate living expenses)? Choose the two most applicable. (% respondents)Bank

Stockmarket (direct investment/individual shares)

Insurance products

79

29

27

Property14

Mutual Funds10

Pension Funds7

Not applicable—we don’t have any savings2

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

I/we invest in stocks or other products when I/we hear a good tip from friends/family/stockbroker

I/we prefer to invest in property

5.58

4.12

4.06

I/we occasionally invest in stocks, bonds, and other products but only with money I/we am prepared to lose3.93

I/we prefer insured products3.88

I/we regularly invest in non-bank financial products such as mutual funds, individual stocks, bonds, etc3.65

I/we only put our money in no-risk products such as savings accounts, time deposits, etc2.78

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

I/we have had to spend some of our existing savings to meet immediate living costs

No change

36

22

16

I/we have increased our savings because we anticipate higher costs in the near term15

I/we have stopped saving (ie, we spend all of our income each month)9

Don’t know2




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

No change

I/we have had to spend some of our existing investments to meet immediate living costs

32

19

17

I/we have increased our investments because we anticipate higher costs in the near term13

I/we have stopped investing10

I/we have reduced the amount we invest because we anticipate higher costs in the near term9

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

No effect

I/we take more risk because I/we need higher returns

64

24

12

14. Please rate your level of agreement with the following statements where 1=strongly agree and 5=strongly disagree. (% respondents)

As a result of the financial crisis I/we will need to delay our retirementStrongly agree 1 2 3 4

As a result of the financial crisis I/we probably need to work part-time post retirement

As a result of the financial crisis I/we have had to invest in higher risk products for potentially higher returns

As a result of the financial crisis our child/children may need to support themselves in further or higher education

322417 14 13

2314 111536

137 252233

352310 1418

As a result of the financial crisis I/we have had to adjust our lifestyle342816 814

As a result of the financial crisis I/we will need to rely on our children to help support us32115 3121

As a result of the financial crisis I/we have had to seek assistance from family members32138 2521

The financial crisis has not affected our financial situation311810 1723

Strongly disagree 5




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

With a mandatory retirement scheme to which we are currently contributing

Insurance annuity

30

30

30

Stocks/shares/fund dividends25

Work part-time post retirement24

Rental income from property18

Company pension plan18

With a retirement scheme to which we intend to contribute in the future16

Our children will look after us financially11

The government will look after us11

No plans to retire6

Don’t know6

No financial plans for our retirement4

We will sell our family business/rely on revenue from our family business3

16. Do you think you will be able to maintain your current standard of living once retired? (% respondents)No

Yes

Don’t know

42

33

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

Cut back on my lifestyle now

Delay my retirement

47

41

35

Work in a different job for fewer hours or with fewer responsibilities instead of retiring29

Rent out/sell my property26

Expect the government to increase benefits22

Invest in higher return (higher risk) financial products15

Move to a lower cost country13

Rely on my children13

Don’t know6




18. How do you think your costs for the following will change in the next five years? Select all that apply. (% respondents)

Children’s educationIncrease significantly Increase moderately Stay the same Decrease



Your own healthcare

174236 4 1

4011 1443

22 122747

414213 13


Not applicable

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

I have had to take on an additional job

I can only work part-time because I need to look after my child/children

36

14

13

I have had to take on a lower paid job that gives me more flexibility over the hours I work12

I have had to find a job to finance my parents/child/children11

I have given up my job to look after my child/children10

I can only work part time because I need to look after my child/children and parents9

I have given up my job to look after my child/children and parents7

I can only work part time because I need to look after my parents5

I have given up my job to look after my parents4

No impact28




20. What is your biggest fear about the future financially? (% respondents)I/we will lose my/our jobs

Health problems that affect my/our ability to work

Another financial crisis that would erode my/our savings

25

19

15My/our children will need more financial support as they go to university/college

15

My/our parents will require expensive medical care8

My/our children will be unable to find jobs and will require financial support into adulthood

6

I/We will have to fully support ourselves rather than relying on our children

4

Who bears the burden4

Our child /children will not look after us the way that we look after our parents

2

Our only child will not be able to support both of us1

21. In terms of time spent caring for or arranging care for your parents, which one of the following best describes your situation? (% respondents)I do most of the work

My spouse and I share the burden equally

My/our siblings share the burden equally

34

31

16

My spouse does most of the work11

My/our siblings do most of the work6

My child/children helps out1

22. In terms of additional help to care for your parents, which of the following apply? (% respondents)We pay for a domestic helper for my parents

We pay for a professionally qualified helper for my parents

My/our parents are in a care institution

17

13

6

None of the above64

23. In terms of time spent caring for or arranging care for your children, which one of the following best describes your situation? (% respondents)I do most of the work

My spouse and I share the burden equally

My spouse does most of the work

35

34

20

My parents help out8

My/our siblings help out3

24. In terms of additional help to care for your children, which of the following apply? (% respondents)We send our children to a day care centre

We pay for a domestic helper for our children

None of the above

22

17

61

25. Approximately how many hours a week do you/your spouse spend caring for your parents? (% respondents)0-10

11-20

21-30

50

30

12

31-404

More than 404




26. Approximately how many hours a week do you/your spouse spend caring for your children? (% respondents)

More than 40

21-30

11-20

34

24

19

31-4013

0-1010

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)

I expect to look after my parents as they get olderTotally agree 1 2 3 4

I expect my children to look after me when I get old

I expect to look after my children until they are in their mid-twenties

I expect to look after myself when I get old

233637 3 2

2313 71939

26 41032 27

253434 35

I expect my spouse rather than my child/children to look after me when I get old313122 610

My friends and I will take care of each other as we get old331912 1917

The community will look after me when I get old33137 2424

The government will look after me when I get old301612 2121

Totally disagree 5

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

Governments should financially support individuals and families in looking after the elderly

Individuals should bear the primary financial responsibility of looking after themselves when they get old

32

28

28

Governments should bear the primary financial responsibility of looking after the elderly12




29. In terms of planning for retirement, who do you think should have primary responsibility? (% respondents)The government, with a defined contribution pension plan

Individuals, with private pension plans

Other, please specify

55

44

1

30. In which country are you personally located? (% respondents)Taiwan

China

Australia

15

14

Hong Kong14

Japan14

Singapore14

South Korea14

14

31. What is your total annual household income? Australia: (% respondents)Under AUD 75,000

AUD 75,000–AUD 100,000

AUD 100,001–AUD 125,000

45

25

AUD 125,001–AUD 150,0007

Over AUD 150,0007

17

32. What is your total annual household income? China: (% respondents)

RMB 50,000–RMB 100,000

RMB 100,001–RMB 150,000

RMB 150,001–RMB 200,000

35

27

Under RMB 50,00015

Over RMB 200,0004

19

33. What is your total annual household income? Hong Kong: (% respondents)

HKD 200,000–HKD 300,000

HKD 300,001–HKD 400,000

Over HKD 500,000

26

22

HKD 400,001–HKD 500,00017

Under HKD 200,00016

19

34. What is your total annual household income? Japan: (% respondents)

JPY 4,000,000–JPY 6,000,000

JPY 6,000,001–JPY 8,000,000

Over JPY 10,000,000

34

27

JPY 8,000,001–JPY 10,000,00014

Under JPY 4,000,00010

15

35. What is your total annual household income? Singapore: (% respondents)

SGD 60,001–SGD 80,000

SGD 40,000–SGD 60,000

Over SGD 100,000

25

22

SGD 80,001–SGD 100,00016

Under SGD 40,00015

22

36. What is your total annual household income? South Korea: (% respondents)Under KRW 50,000,000

KRW 50,000,000–KRW 70,000,000

KRW 70,000,001–KRW 90,000,000

42

37

KRW 90,000,001–KRW 110,000,0006

Over KRW 110,000,0000

15




TWD 1,000,001–TWD 1,250,000

37. What is your total annual household income? Taiwan: (% respondents)

TWD 750,000–TWD 1,000,000

Over TWD 1,500,000

Under TWD 750,000

35

24

15

TWD 1,250,001–TWD 1,500,0007

19

38. What is your marital status? (% respondents)Married

Single

89

11

39. In which age group do you belong? (% respondents)Under 30

30-35

36-40

15

30

41-4516

46-5011

51-606

Over 600

22

40. How many children do you have? (% respondents)1

2

More than 2

49

40

12

41. Which of the following best describes the occupation of the main earner in the household? (% respondents)Manager

Professional (doctor, lawyer, etc)

Senior manager

C-Level/director level executive

Entrepreneur/business owner

Other

23

19

12

5

5

36

42. How old are the parents being supported by you? (% respondents)Under 60

60-70

71-80

Over 80

21

45

25

8

43. What is the size of your household? - Number of children (% respondents)1

2

3

4

49

38

9

3

More than 40




44. What is the size of your household? - Number of grandparents (wife’s parents) (% respondents)None

1

2

21

25

54

45. What is the size of your household? - Number of grandparents (husband’s parents) (% respondents)None

1

2

51

21

27

46. What is the size of your household? - Number of maids (% respondents)None

3

1

2

73

19

3

4 or more4

1

47. What is the size of your household? - Number of relatives (excluding parents) (% respondents)1

2

3

4

18

11

14

16

57

65

71

82

91

10 or more25

48. How old are the children in the household? (respondents)Under 10 years

Over 18 years

10-14 years

15-18 years

640

270

117

140

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

Female

50

50

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.

Cover image - Michael Aveto/Getty Images

LONDON26 Red Lion SquareLondonWC1R 4HQUnited KingdomTel: (44.20) 7576 8000Fax: (44.20) 7576 8500E-mail: [email protected]

NEW YORK750 Third Avenue5th FloorNew York, NY 10017, USTel: (1.212) 554 06000Fax: (1.212) 586 0248E-mail: [email protected]

GENEVABoulevard des Tranchées 161206 GenevaSwitzerlandTel: (41) 22 566 2470Fax: (41) 22 346 93 47E-mail: [email protected]

HONG KONG6001, Central Plaza18 Harbour RoadWanchaiHong KongTel: (852) 2585 3888Fax: (852) 2802 7638E-mail: [email protected]

Paper size: 210mm x 270mm

An Economist Intelligence Unit survey

Sponsored by


C

M

Y

CM

MY

CY

CMY

K

Cover_final.pdf 6/23/2010 5:09:18 PMCover_final.pdf 6/23/2010 5:09:18 PM

feeling the squeeze: asia’s sandwich generation

Business

genevaa report

quantitative survey

financial crisis22

financial pressure

dearth of financial

sponsored byemail

reports quantitative

priority13 parents