CONTENTS ABOUT AIA STUDY BACKGROUND EXECUTIVE SUMMARY. KEY FINDINGS Quality of life Financial security Retirement Family and education

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1 Report Philippines 2014

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3 CONTENTS ABOUT AIA STUDY BACKGROUND EXECUTIVE SUMMARY KEY FINDINGS Quality of life Financial security Retirement Family and education REPORT PHILIPPINES 3

4 ABOUT AIA

5 ABOUT AIA INTRODUCTION TO AIA AIA Group has been meeting the risk protection and savings needs of people across the Asia-Pacific region since The Group comprises the largest independent publicly listed pan-asian life insurance group with operations in 17 markets in the Asia-Pacific region. It is a market leader in the region (ex-japan) based on life insurance premiums. Through an extensive network of agents, partners and employees across the Asia-Pacific region, AIA serves the holders of more than 28 million individual policies and over 16 million participating members of group insurance schemes. For more than 95 years, AIA has been helping our customers realise their hopes and aspirations. AIA uses knowledge of our customers needs and the experience that we have gained over the years to continue to develop a range of products and services including life insurance, accident and health insurance, savings plans, employee benefits, credit life and pension services that support our customers and their families through every stage of their lives, as well as our corporate clients throughout the region. REPORT PHILIPPINES 5

6 STUDY BACKGROUND

7 STUDY BACKGROUND AIA SURVEY ON MIDDLE CLASS HOPES AND ASPIRATIONS INTRODUCTION TO THE STUDY As the leading pan-asian life insurance group, AIA created the AIA Survey on Middle Class Hopes and Aspirations to gain additional insights about the middle class and their priorities to strengthen our understanding of the middle class in the Asia-Pacific region. The inaugural survey conducted in 2013 covered the Greater China markets of mainland China, Hong Kong and Taiwan. In 2014, the survey focused on six Association of Southeast Asian Nations (ASEAN) markets: Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam. The study provides an in-depth look at the fast-growing middle class group across four key areas, namely quality of life, financial security, retirement, and family and education. The survey sheds light on how the middle class perceives their lives, family and values, financial well-being and their career and retirement. It is clear that personal circumstance, culture, and the level of economic development in the market where respondents are living, are key drivers that greatly shape the hopes and aspirations of the middle class across the region. SURVEY METHODOLOGY This report specifically highlights the survey findings for the Philippines, which were collected through 500 interviews conducted between 10 July and 12 August 2014, with people in the Philippines who identified themselves as middle class (the same methodology was adopted across all surveyed ASEAN markets): 400 online interviews were conducted with people from the Philippines aged The respondants are individuals who previously indicated willingness to participate in online surveys and who identified themselves as middle class. To improve representativeness, an additional 100 face-to-face interviews were conducted with people in the Philippines aged 50 and older The sample was evenly split between men and women The margin of error for the study is within +/-4.4% The study was conducted by Ipsos, a leading global market research agency REPORT PHILIPPINES 7

8 EXECUTIVE SUMMARY

9 EXECUTIVE SUMMARY THE MIDDLE CLASS IN THE PHILIPPINES THE PHILIPPINES MIDDLE CLASS HAS THE FOLLOWING CHARACTERISTICS: Quality over quantity The Philippines middle class places health, having a peace of mind and having a comfortable retirement ahead of wealth Forty-four percent of the Philippines middle class mention being healthy as one of their top life goals, 38% list having peace of mind and 36% list having a comfortable retirement. they would be more likely to invest or start a new business than to spend it. The retirement challenge They are confident that they will have sufficient savings for retirement Three-fifths (60%) of the Philippines middle class respondents are confident that their family will have enough savings for a comfortable retirement. Only one in twenty (5%) list becoming wealthy as their main motivation in life. Satisfaction and success They are satisfied with their lives and are very optimistic A majority (76%) are satisfied with their lives, including 20% who say they are very satisfied. In general, the higher the income and wealth in the Philippines, the higher the satisfaction levels. Four-fifths (80%) of those with at least PHP2 million in assets are satisfied with their lives. Almost three in five (59%) consider themselves successful, despite having a lower average income compared to the other ASEAN markets surveyed apart from Indonesia. Entrepreneurship culture They are motivated to start their own business One in three (33%) middle class respondents list starting a business as one of their goals in life the second highest percentage among ASEAN markets surveyed. Currently, 21% of the middle class respondents in the Philippines are self-employed. The Philippines middle class puts the highest emphasis on making financial plans, with 94% prioritising planning ahead over living in the present. If they came into money, REPORT PHILIPPINES 9

10 KEY FINDINGS

11 WHO ARE THE PHILIPPINES MIDDLE CLASS? The middle class in the Philippines are highly educated The self-identified middle class has an average household income of PHP32,290 per month. Percentage of total Philippines population that consider themselves middle class according to monthly household income They are the most educated middle class among all the ASEAN markets surveyed, with close to three-quarters (72%) having attained a university degree or higher. The percentage of university graduates is highest among those aged between 25 and 34, of whom 87% have a university degree. Over half (52%) of those with a university degree are women. Below PHP10,000 PHP10,000-19,999 PHP20,000-29,999 PHP30,000-39,999 PHP40,000-49,999 PHP50,000 or more 19% 39% 48% 64% 69% 76% On average, they own household assets valued at PHP1.2 million, including property. This is the lowest among the middle class in the ASEAN markets surveyed. REPORT PHILIPPINES 11

12 QUALITY OF LIFE AIA Middle Class Index (MCI) The Philippines middle class has positive expectations about their future AIA Middle Class Index Scores above 50 indicate an expectation of improvement for each aspect of life The Philippines middle class is highly likely to think their life situations will improve over the next 12 months, as shown by the AIA Middle Class Index* (MCI) score of 70.6 (where 50 represents an equal balance of expectations for improvement and for worsening ). Middle class Filipinos are particularly positive about an improved family life, health and career prospects. Almost two-thirds (64%) say that the population of the Philippines middle class will grow over the next 10 years. Compared to the other ASEAN markets surveyed, this is one of the lowest percentages of respondents who hold this view. Only those in Malaysia were less likely to think the number of middle class will grow over the next 10 years (56%). *The AIA Middle Class Index is a summary score for whether respondents think aspects of their life will improve or worsen over the next 12 months. An index above 50 indicates they expect their life will improve and an index below 50 indicate they expect their life to worsen. The index is calculated by the formula (P1*1) + (P2*0.5) + (P3*0), where P1 is the percentage who say that their situation will improve, P2 is the percentage who say it would stay the same and P3 is the percentage who say it will worsen. Overall Your family life Your health and wellbeing Your career or business Your romantic life Your home and the quality of where you live The value of your property The value of your savings The amount of money you have available to spend The environment where you live The amount of time you have for leisure AIA GROUP LIMITED

13 QUALITY OF LIFE EXPECTATIONS RELATED TO LIFE EVENTS New possessions (such as cars and homes) have the highest links with expectations among the Philippines middle class Purchasing a new car (MCI 80.3) and purchasing a new house (MCI 80) are the two life events that are linked with the most positive expectations among the Philippines middle class. They tend to have positive expectations even if they experience difficult events such as loss of a job, death of a loved one and increased debt. This sentiment is quite similar to results from the survey of the Indonesian middle class. The younger individuals of the Philippines middle class tend to be the most positive expectations. Those aged below 35 have an MCI index of 72.4, while those over 55 have an MCI index of The higher the income, the more positive the expectations. Those earning PHP50,000 or more each month have an MCI index of 74.1, whereas those earning below PHP30,000 have an MCI index of Overall AIA Middle Class Index among those experiencing different life events All respondents Purchased a new car Purchased a new home Won a big prize Job promotion/ pay increase Got married Moved to a new city Came into money/ inheritance Started a new job Birth of a child End or lack of a relationship Started a new relationship Loss of job Death of a loved one Increased debts % 4% 2% 16% 3% 7% 4% 20% 9% 10% 6% 15% 15% 33% % who had experienced this change in the past 12 months HOPES AND ASPIRATIONS Health and peace of mind are top goals for the Philippines middle class When asked to select their top goals in life, being healthy is mentioned as the most important, especially among older respondents (72%). Spiritual well-being is also important, with 38% indicating having peace of mind as one of the top life goals. This is the highest figure among all other ASEAN markets surveyed. Fifty-two percent of those over the age of 55 report spiritual well-being as a top goal, whereas the younger middle class lists career (41%) and home ownership (41%) as top goals. Those in the 35 to 44 age group most aspire to having a comfortable retirement (47%), whereas those slightly older (45 to 54) are most likely to want their children to be successful (46%). Top five goals in life Being healthy Having peace of mind A comfortable retirement Helping my children be successful A happy marriage/relationship Starting my own business Owning a home Having a financial safety net Having enough for emergencies Having a successful career Travelling the world Paying off debt Being happy with who i am Paying for children s education Owning a car Taking a vacation Having children Having close friendships Getting more education 44% 38% 36% 34% 33% 33% 31% 30% 28% 26% 20% 20% 19% 14% 10% 10% 7% 7% 3% REPORT PHILIPPINES 13

14 QUALITY OF LIFE SATISFACTION AND SUCCESS They are satisfied with their lives and consider themselves successful More than three-quarters (76%) are satisfied with their lives, including 20% who say they are very satisfied. Satisfaction tends to increase with age, with the older respondents (aged 55 to 64) having the highest level of satisfaction (86%). In general, satisfaction increases when income and wealth are high in the Philippines, 84% of those with total assets of at least PHP2 million report being satisfied with their lives. Almost three in five (59%) consider themselves successful, despite having a lower average income compared to those of the other ASEAN markets surveyed apart from Indonesia. DREAMS They have dreams and are optimistic about achieving them Almost all (99%) of the Philippines middle class respondents say they have dreams, with 11% claiming to have fulfilled them already. This is the highest percentage among all of the other ASEAN markets surveyed. More than three-quarters (79%) think they will achieve their dreams in the long run. Only one-in-ten (10%) think they will not be able to achieve their dreams, reflecting the overall optimism of the middle class in the Philippines. Their dreams mostly reflect living happy lives with their families and traveling. Dreams and achievements 11% 1% Percentage of middle class Filipinos who are satisfied with their lives by total wealth (including property) 10% Less than PHP200,000 PHP200,000-1,999,999 PHP2,000,000 or more 67% 79% 84% 79% I am yet to fulfil my biggest dream yet I think I ll be able to achieve it Percentage of middle class Filipinos who consider themselves successful by age years 56% I am yet to fulfil my biggest dream and I don t think I ll be able to achieve it Yes I have already fulfilled my biggest dream I have never thought about what my biggest dream is (Due to rounding, the percentages in the chart do not add up to 100%.) years years years 57% 60% 72% To be financially free and to travel all around the world Be financially stable and have a happy family Provide a good life for my family and a good education for my children Achieve financial security especially when my children attend college Quotes from Philippines s middle class 14 AIA GROUP LIMITED

15 QUALITY OF LIFE STARTING A BUSINESS Many want to achieve a higher income by starting their own business One in three (33%) middle class respondents in the Philippines list starting a business as one of their goals in life. This is the second highest percentage after that of the Indonesian middle class. This includes 41% of those under the age of 35. Currently, 21% of the middle class respondents are self-employed. Amongst the ASEAN markets surveyed, the Philippines middle class are also the least likely (25%) to think that starting a business is a difficult goal to achieve in life. The Philippines middle class list having a higher income (26%) as the key motivation for starting a business. Lack of capital is the key barrier for starting their own business for two-thirds (66%) of the middle class. Thirtyeight percent are also concerned about lack of steady income if they venture into their own business. OTHER EXPECTATIONS AND ASPIRATIONS They live in the city and love city life The majority (85%) of the Philippines respondents live in cities, with only 9% living in rural areas. Given a choice, 43% would continue to live in a modern city. This is the highest preference for city life among all ASEAN markets surveyed. Where they would buy a house if they had US$2 million to spend In a modern city In the countryside In the suburbs By a beach In a historical city In the mountains By a forest 19% 14% 14% 6% 3% 1% 43% Why they want to start their own business 10% 8% 3% Higher income 26% Bequeathing the business to my children Be my own boss Having more free time 11% Enjoying my work more Contributing to the community through running a social enterprise 13% 14% 14% Becoming an expert at what I do Earlier retirement (Due to rounding, the percentages in the chart do not add up to 100%.) REPORT PHILIPPINES 15

16 FINANCIAL SECURITY FINANCIAL SECURITY A majority believe they can achieve financial security in their lifetime The Philippines middle class respondents who consider themselves financially secure according to monthly household income Nearly half (48%) consider themselves financially secure. This is the lowest percentage among all other ASEAN markets surveyed. Despite this, the respondents as a whole are relatively optimistic about their future. Seventy percent think that they will achieve financial security within their lifetime. Below PHP30,000 PHP30,000-49,999 PHP50,000 or more 39% 43% 64% On average, the middle class in the Philippines think they need at least PHP30 million to be wealthy and at least PHP12 million to achieve financial security for the rest of their life. The Philippines middle class respondents who consider themselves financially secure according to assets Less than PHP200,000 PHP200,000-1,999,999 PHP2,000,000 or more 29% 51% 66% 16 AIA GROUP LIMITED

17 FINANCIAL SECURITY FINANCIAL PLANNING They would invest or start their own business if they had a windfall When asked what they would do if they received a large sum of money, respondents in the Philippines say that they would either invest it (25%) or use it to start their own business (24%). Younger respondents under the age of 35 are particularly likely to want to start their own business (33%). The Philippines middle class is prudent with money. Ninety-four percent think it is more important to make financial plans than to live for the present a much higher percentage than the rest of the ASEAN markets surveyed. HIGH COST OF EMERGENCIES Cost of unexpected emergencies is the biggest concern The cost of unexpected emergencies (65%) is the biggest concern for the Philippines middle class. This is the highest percentage for all ASEAN markets surveyed. Almost half of the respondents (49%) are also concerned about healthcare costs. Seventy-four percent of those over 55 years of age agree to this. Just under one-third (31%) are worried about the cost of their children's education. They believe in the power of luck with 37% saying that luck plays a big part and a further 45% saying it plays some part in achieving financial security. Almost three-quarters (74%) of those over 55 years of age believe that luck plays a very big part in financial security. Over one-third (37%) of men and 30% of women say they are the ones in their household most responsible for financial decisions. This makes the Philippines the market with the least imbalance between men and women regarding decision-making on household finances. Biggest concerns regarding life costs Unexpected emergencies Cost of healthcare Cost of children s education Cost of raising children Cost of housing Cost of groceries Saving for retirement Credit card debt 20% 17% 17% 14% 31% 28% 49% 65% If you suddenly received a very large amount of money, what would you most look forward to doing with the money? Cost of vacations Cost of insurance 5% 5% Invest it Start my own business Save it in a bank Spend it on children Buy a house or car Share with family/relatives/friends Pay off debts Give it to charity 10% 8% 8% 8% 7% 4% 25% 24% Cost of transportation Cost of technology/gadgets Cost of clothing None of the above 4% 2% 2% 2% Quit my job 2% Go on vacation 2% Spend it day-to-day 1% REPORT PHILIPPINES 17

18 RETIREMENT THE RETIREMENT CHALLENGE The Philippines middle class is confident about saving enough for retirement Three-fifths (60%) of the Philippine middle class respondents are confident that they are able to save enough for a comfortable retirement. This high level of confidence correlates to the finding that only one-quarter (25%) of respondents consider saving for retirement to be one of the most difficult life goals to achieve. Life goals thought most difficult to achieve Travelling the world Owning a car 28% Starting my own business 25% Saving for retirement 25% Getting more education 23% Owning a home 22% Taking a vacation 19% Having a financial safety net 16% Having a successful career 13% Having enough for emergencies 13% Having peace of mind 12% A happy marriage 11% Paying off debts 10% Being healthy 10% Children being successful 7% Being happy with who I am 7% Having children 6% Having close friendship 5% Paying for children s education 5% 51% 18 AIA GROUP LIMITED

19 RETIREMENT RETIREMENT SAVINGS The Philippines middle class plan to retire and they rely on different methods to save for retirement Almost all (91%) of the working middle class respondents have hopes to retire someday. This is the highest percentage among all other working ASEAN respondents. The most preferred way to save for retirement is through equities, bonds, mutual funds (63%). A further 56% rely on regular saving plans. RETIREMENT PLANS They want to spend more time with their family One-third (32%) of the Philippines middle class respondents want to spend more time with their family when they retire. By contrast, one in five (20%) hope to remain active in retirement by starting their own business, including 25% of men. Given a choice of different activities they could do when they retire, an overwhelming majority (71%) say they would like to sail around the world. Retirement plans and sentiments 3% 2% 4% I hope to retire someday I enjoy work so I don't plan to retire 91% Things they look forward to in retirement Spending time with family 32% Starting my own business 20% Travelling 17% Relaxing 15% Spending time with children 6% Volunteering in my community 5% Starting a second career 3% Taking care of grandchildren 2% I don't expect ever to save enough for retirement I haven't thought about it Which one of these they would most want to do when retired Investment methods used to save for retirement Sail around the world 71% Learn a musical instrument 8% Equities, bonds or mutual funds 63% Learn a new language 7% Regular savings account 56% Climb a mountain 7% Real estate 49% Run a marathon 3% Retirement savings plan 47% Explore North or South Poles 2% Paint a masterpiece painting 2% Act in a television play 1% REPORT PHILIPPINES 19

20 FAMILY AND EDUCATION CHILDREN ARE KEY MOTIVATORS Improving life for their children and financial security are what motivates them most in life Making their children s life better (32%) and being financially secure (32%) are the key motivators among the Philippines middle class respondents. Almost half (46%) of those with children are most motivated by improving their children s life. What motivates them most in life DESIRES TO HAVE CHILDREN They are very keen to have children The Philippines middle class respondents are keen to have children with only 2% planning never to have children. Almost half (48%) of surveyed parents who are working full-time would like to work part-time, so that they can spend more time with their children. A further 16% say they would like to give up their jobs and become stay-at-home parents. Almost as many working men (15%) as women (18%) want to become stay-at-home parents. Improving life for my children Becoming financially secure Make a better life for myself Making a better life for my parents Advancing my career / business Becoming wealthy Being respected by my peers Receiving a good education 10% 9% 5% 5% 5% 1% 32% 32% Plans for family by the Philippines middle class 27% 5% 2% Have children still 50% at school Have children who have left school Will have children some day May have children some day 16% Don't want children 20 AIA GROUP LIMITED

21 FAMILY AND EDUCATION GENERATIONAL CARETAKERS Over half of respondents (53%) think that children should be responsible for supporting their parents financially in retirement. This is the lowest figure from all the ASEAN markets surveyed, where regionally 70% think children should help parents financially. Even so, over half (55%) of the Philippines middle class respondents are currently supporting their own parents or their spouses parents. The Philippines middle class thinks it is more important to save for their children s education than for retirement. Just over one quarter (26%) would prioritise their children s education and only 6% would prioritise their retirement savings How the Philippines middle class prioritises savings for children s education and retirement Almost all (97%) of the middle class respondents are involved in their children s education with more than three-quarters (79%) being very involved. Just under half (44%) of those who are parents are concerned about the cost of their children s education and 37% worry about the cost of raising their children. On average, middle class respondents who are parents think they need to set aside at least a fifth (20%) of their average monthly income as savings for their children s education. This is one of the highest percentages among the surveyed ASEAN markets. Thirty-six percent of the men and 39% of the women say they are the individuals in their households primarily responsible for their children s education. The Philippines middle class parents own educational achievements 8% 9% Post Graduate 6% 26% Children s education is more important Children s education and retirement savings are equally important Retirement savings are more important 19% 63% (Due to rounding, the percentages in the chart do not add up to 100%.) University A-Level/Polytech Other 68% Educational goals that the Philippines middle class parents have for their children HIGH EXPECTATIONS FOR THEIR CHILDREN S EDUCATION The Philippines middle class parents expect their offspring to exceed their own education achievements 1% 1% 2% 44% Post Graduate University The Philippines middle class has the highest percentage of respondents holding a university degree across all the ASEAN markets surveyed. It is not surprising that they desire the same for their children. Almost all (96%) hope their children will achieve either a university or a postgraduate degree. 52% A-Level/Polytech Other None of the above REPORT PHILIPPINES 21

22 FAMILY AND EDUCATION ASPIRATIONS FOR THE NEXT GENERATION They have a positive outlook towards their children s future Only about one-quarter (24%) of the Philippines middle class respondents believe their children s life will be harder then their own this number is the lowest across all ASEAN markets surveyed. Four in five (80%) of the respondents who are parents list good health as one of the top priorities for their children. With a focus on spirituality, 71% of parents emphasise the importance of good virtues for their kids. This is higher than any other ASEAN markets surveyed. Goals thought most important for their children Good health Good virtues A good career General happiness Financial success Academic achievement Good friends Having family & children of their own Social status Involvement in extracurricular activities Nice possessions Romantic love Marrying someone wealthy 24% 22% 12% 10% 7% 4% 2% 80% 71% 60% 55% 46% 45% 22 AIA GROUP LIMITED

23 AIA GROUP LIMITED REPORT PHILIPPINES AIA.COM