Hong Kong’s MPF beat overseas peers in 2012 — but members got little investment advice

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

In May 2012, an industry joint group published an Ernst & Young study of Hong Kong’s MPF: eleven years in, the system had over 2.5 million members and more than HK$365 billion in assets, with one- and five-year performance ahead of overseas retirement plans and fees comparing well. But the report flagged one shortfall — members got little investment advice, and it showed in their retirement outcomes.

Why did the lack of investment advice matter?

It mattered because without proper guidance, members easily picked the wrong mix — directly harming their retirement benefits. As of May 2012, most members’ assets were tilted toward equities, especially Hong Kong stocks, so three-year performance suffered in the financial crisis; meanwhile 24 per cent of assets sat long term in low-risk, low-return combinations, rarely adjusted to markets.

How did fund choice and fees compare?

Against retirement plans in Australia, Chile, Singapore and the United Kingdom, Hong Kong’s MPF came out ahead on fund choice, performance and fees — with fees expected to fall further as scale grew. Ernst & Young still urged trustees to communicate more with members, keep pursuing scale and efficiency to cut costs, and improve MPF transparency.

Three directions from the report

1. Communicate more: trustees should engage members proactively with investment-relevant information.
2. Cut costs: keep studying fee reductions through scale and efficiency.
3. Raise transparency: make charges and performance clearer and more comparable.