EY study: Hong Kong should study raising MPF contributions, mandatory and voluntary

This article is a rewrite of a report from June 2012.

A study commissioned by the insurance, investment funds and trustees associations and conducted by Ernst & Young found Hong Kong’s MPF had run well over 11 years, managing HK$365 billion for 2.5 million members and covering 99 per cent of the workforce. With the population ageing, the report said it was time to study raising MPF contributions — mandatory and voluntary together.

How did the report rate MPF performance?

Despite the global financial crisis, MPF’s one- and five-year performance held up well, though the three-year record lagged. Members mostly allocated to equities — heavily Hong Kong stocks — dodging Western market turmoil; but many also sat in low-risk, low-return options, with about 24 per cent of assets in bond, money market and guaranteed funds.

The report judged Hong Kong’s MPF management fees competitive, with room to fall further.

Why study higher contributions?

Compared with overseas retirement schemes, Hong Kong’s MPF contribution levels were low. The report found many members lacked the time or expertise to manage their MPF portfolios and showed little initiative in seeking investment advice. EY recommended the authorities consider increasing mandatory and voluntary contributions while improving personal financial advisory services.

Covering the same EY study as a companion launch report, this story’s angle was the policy prescription: not just fees, but the structural problem of contributions being too low.