A Decade of Thin Returns: MPF Needs Reform — Portable Individual Accounts Are the Way Out

(Editor’s note: this report was originally in English and is rewritten in Chinese per this site’s practice.)

Since its 2000 launch, MPF has returned 5.1% a year against 0.37% average annual inflation — just 4.7% in real terms. The results are poor, and the author argues the way out is an early shift to an individual, portable MPF scheme that lifts returns for everyone, especially the neediest savers.

Why oppose a universal retirement scheme?

Because “pay-as-you-go” social pensions are destined to be held hostage by populism, the author argues. Such schemes inevitably build in redistribution — rich to poor, young to old — and with politics dominating design they become insolvent, discourage work and saving, and pile fiscal burdens onto an ageing population. He traces the lineage to Bismarck’s 1889 German social insurance, calling modern pay-as-you-go systems its intellectual descendants.

Which way should reform go?

Move to portable individual accounts and let better returns do the work. The author urges converting MPF early into an individually portable, member-chosen system; those who save least and depend most on MPF performance would gain the most, deflating populist demand for a social scheme.

Is Singapore’s CPF a good benchmark?

The author says no. Purely private schemes usually lack redistribution features, and Singapore’s model has its own problems (the original ends here). Either way, reform should make MPF perform better — not add another redistributive scheme.

See long-run fund performance at MPF fund comparison.