Fidelity’s Cheng: voluntary contributions supercharge the MPF snowball — start early

Hongkongers live longer than ever — men to 79.3 on average, women to 85.5. From retirement at 65 that’s well over a decade to fund. Can the combined 10% employer-employee MPF contribution really stretch that far? Fidelity Hong Kong managing director Bruno Cheng says sandwich-generation workers and ordinary employees alike should harness MPF voluntary contributions and compounding.

How unprepared are Hongkongers?

The retirement index averages 54%, far below the recommended 67%. Fidelity’s 2010 Retirement Index found Hongkongers well short of a comfortable retirement; nearly half expect no more than HK$2 million in assets at retirement — not enough. Add pricey healthcare where one serious illness can wipe out a family, a system only ten years old, many workers starting contributions after 40, and inflation’s corrosive power.

What about MPF voluntary contributions?

No subscription fees, free switching, flexible withdrawal. Many providers offer special voluntary contribution plans letting employees contribute straight from a bank account without going through the employer; special voluntary contributions can generally be withdrawn freely, free of the age restrictions on mandatory contributions (some providers set conditions on frequency or minimum amounts). MPF contributions carry no fund subscription fees, so every dollar is invested, and switching investment choices costs nothing.

How much does starting early matter?

HK$500 a month from age 30 means HK$1,500 more monthly in retirement. Take a worker earning HK$20,000: joining the MPF at 30 funds about HK$5,700 a month over 20 retirement years. Add HK$500 monthly voluntary contributions from 30, and that’s HK$7,200 — HK$1,500 (26%) more. Start the same HK$500 at 40 instead, and the extra is only HK$700 (12%) a month — less than half. The earlier you start, the mightier the compounding.

To explore voluntary-contribution plan options, visit MPF fund comparison.