20 March 2019, 01:19 GMT
Japan has the world’s highest percentage of elderly, and therefore provides a cautionary tale for other countries facing similar demographic trends, such as China and Germany. More than a quarter of Japanese citizens are over 65, and last year marked the first time that people aged 75 or older comprised a majority of this elderly population.
Figures from Japan’s National Police Agency show the annual number of money transfer scams grew for six consecutive years through 2017. In each year, the majority of victims have been people aged 65 or older; last year, they accounted for 78 per cent of those who fell for fraud.
More victims among the overconfident
Fidelity’s new survey 1 showed that elderly people had an average financial literacy score of 56.3 out of 100. Among respondents, 13.7 per cent were found to have excessive confidence in their financial literacy - meaning they scored below average on the test despite assessing their own financial knowledge as ‘high’ or ‘much higher than average’.
A modest portion of all respondents (4.6 per cent) said they had fallen victim to financial fraud, the most common type of which was fraudulent investment solicitation (58.7 per cent). The percentage of victims was found to be higher among those who were overconfident in their knowledge: it was 6.4 per cent for those who rated themselves ‘high’ and nearly double the average rate (9.0 per cent) for those who rated themselves ‘much higher’.
Chart 1: Elderly Japanese who overestimated their investment knowledge were more likely to be victims of financial crimes
The survey found no apparent correlation between the experience of fraud and the amount of assets a respondent held, and only a relatively small percentage (12.2 per cent) said they were afraid of future harm from financial fraud.
Half live happily on public pension benefits alone…for now
About three-quarters (74.8 per cent) of elderly respondents expressed vague anxiety about their financial future, but the majority of these anxious people declined to specify what they were concerned about. Only 13.1 per cent of them listed concrete concerns, which included outliving their assets or facing decreasing benefits and rising costs.
As the level of respondents’ financial literacy increased, their concerns shifted from factors that cannot be controlled, such as longevity and pensions, to factors which they can control to at least some extent, such as nursing care and having sufficient assets.
About half (49.7 per cent) of respondents said that they did not use their assets to cover retirement expenditures, and that they lived solely on their public pension benefits. This group said they were satisfied with their living standards, despite their relatively low income. However, as pubic pension benefits will be cut by more than 20 per cent in the future, younger generations counting on living solely on public pension benefits might not be as satisfied - and in fact, many might not even be able to survive on these benefits alone.
The Fidelity survey underscores the importance of continuing to educate elderly investors, not only to put their fears at ease and allow them to maintain their lifestyles in retirement, but to empower them to know when to resist an investment that sounds too good to be true.
Note: The survey was conducted online in the eight days from 3 Dec. to 19 Dec. 19, 2018, and 11,960 valid responses from both males and females aged 65 to 79.
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