- MPF pension funds are a third choice of retirement savings for Hongkongers, according to an investment funds association survey
- Bank deposits account for 53 per cent of Hongkongers' retirement savings, while 21 per cent goes into stock investments
Pension funds are a third choice for Hong Kong's working population in terms of allocating their retirement savings, according to the Hong Kong Investment Funds Association (HKIFA).
They put aside about 9 per cent of their savings in the city's Mandatory Provident Fund (MPF) and other pension plans, the industry body said, based on responses from an online survey of more than 900 people during the fourth quarter last year. Some 53 per cent of their savings are loaded in bank deposits and 21 per cent in stock investments.
The MPF's track record has been volatile in recent years, raising questions about its ability to provide Hongkongers with enough coverage in their golden years. Last year, the fund generated an average return of 12.6 per cent from its investments, its third-best showing in a decade, compared with an 8.3 per cent loss in 2018.
"The working population believes that post retirement income will come from multiple sources, and relying on MPF alone will not be sufficient," Terry Pan, who chairs the pensions sub-committee at HKIFA, said at a media briefing.
That may have to do with the perception on returns from MPF compared with other investments, he added.
The MPF had more than 2.8 million members or 73 per cent of the employed population in the city as of March 31, 2019, according to its annual report. It had HK$893.3 billion (US$115 billion) in net asset values in approved constituent funds, a 10 per cent increase from a year earlier.
Hong Kong's MPF pension scheme reports third-best year of the decade, returning 12.6 per cent in 2019
"For an employee who is approaching retirement, his biggest asset is not only the size of his investments, but also the time he has invested those sums," Pan said. "For someone in his mid-30s or 40s, he still has more than 20 years of investing his retirement savings. People should not only hold onto cash and miss out on investment opportunities."
The online survey showed that respondents started planning for retirement at the age of 32 on average. More than half of them hoped to retire by 61, although they expected to retire at 64.
Some 60 per cent of those surveyed expected to retire in Hong Kong, while 30 per cent would only determine the destination after they have retired.
"As more and more employees retire, how to help employees deploy their retirement savings effectively when they reach retirement will become increasingly important," said Philip Tso, vice-chairman of HKIFA's pensions subcommittee.
"The survey indicates that there are needs which are unique to the post-retirement phase, such as income stream," said Tso.
On average, respondents expect the MPF and other savings schemes to only contribute to about 14 per cent of their post-retirement income, while they see 35 per cent to come from bank deposits, 16 per cent from stock investments and 13 per cent from insurance products.
Hong Kong's government has launched several initiatives to encourage retirement savings, including offering tax deductions on voluntary contributions to the MPF beyond the statutory limit. The incentive has also been extended to premiums paid on deferred annuity products.
The current tax deduction limit is HK$60,000 for both tax deductible voluntary contributions and the qualifying deferred annuity polices.
Pan said that the cap for both products should be separated to create greater incentives for employees to better plan their retirement savings.
Although more than 70 per cent of participants were aware of the tax deductible voluntary contributions launched by the government last April, only 16 per cent said that they had joined the scheme.
The HKIFA hoped that the government would create more incentives, such as matching contributions by the government and employers when employees made voluntary contributions.
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