Full MPF portability: why Wong Kwok-ying said “liberate MPF” is the real relief

In October 2011, with the Chief Executive race degenerating into rival housing pledges, columnist Wong Kwok-ying looked elsewhere: instead of grand construction projects that take years to materialise, why not do one small thing with outsized impact — liberate MPF. Note what he meant: not fee cuts, not semi-portability, but full liberation — genuinely preparing citizens for retirement.

What is full MPF portability?

Full MPF portability means members can freely choose their MPF trustees and investment options; the “liberate MPF” case Wong made in October 2011 went far beyond semi-portability — allowing commodity ETFs, inflation-linked bonds (TIPS), iBond (4208), Link REIT (823) and gold ETFs (2840), even using contributions toward a first home’s down payment. He stressed: this is not a price cut, not portability-lite, but full liberation.

Why did he call the current choices seriously inadequate?

Today’s MPF invests in just two buckets: equities and bonds. PIMCO’s asset-allocation quilt shows that under high inflation, both fail — with no commodity ETFs and no inflation-linked bonds, what kind of asset allocation is that? Members keep money in MPF for decades and the pooled sums are enormous; they surely deserve to trade a little liquidity for fund-based holdings with low correlation to stocks and bonds, sheltering from financial turmoil. The overseas example is Harvard’s endowment: equities and bonds are only part of it, alongside property, private equity, commodities — even timberland — beating the market with lower risk. And even without going that far, what is so hard about permitting iBond, Link REIT or a gold ETF?

Why can’t retirement investing be self-directed?

MPF is not real competition — the same names everywhere: the big caps, mainland banks and insurers are unavoidable, in Hong Kong funds, Asia-Pacific funds and aggressive funds alike; a colleague seeking a North America fund gets Amazon (AMZN), Google (GOOG) and Apple (AAPL) doing the heavy lifting. Yet Hongkongers are capable self-directed investors — Americans can buy individual stocks in a 401(k); why can’t Hong Kong? Monthly blue-chip contributions are already many investors’ habit, and at least let them avoid sectors they dislike.

Could contributions go toward buying a flat?

Going further, restrictions could be relaxed to let members use MPF contributions for their own home — hardly revolutionary; Singapore does exactly this. MPF’s goal is forced saving; rather than money languishing in mediocre funds, using it for a down payment or mortgage is immediately effective. Young people grind day and night for a HK$200,000 down payment — releasing HK$100,000 or so of MPF would be a real mercy, provided gains and losses accrue proportionally to the MPF account and cannot be withdrawn for spending. A paid-off home in retirement, paired with a reverse mortgage, should complement each other — better than being forced to fund dud stocks.

How should frictional costs be cut?

Pointless frictional costs should go too: if you want no investment exposure at all, the natural answer is cash; but the current system offers no cash option, only conservative or money-market funds. These half-cash, half-short-bond funds, after fees, return about as much as a time deposit — paying someone else a salary for the round trip. Time deposits should be opened up, with currencies like the renminbi, so money can sit at low cost. Looking back ten years, major equity indices averaged low-single-digit annual returns; after fees and inflation, little remained — and with monthly contributions, much of the principal arrived late, dragging returns lower, sometimes into loss. Another decade of the same would mostly mean paying into a dead pool. Whatever markets do next, opening the platform helps more than it harms. For the fund choices under the current system, see the MPF education hub.