How Can Hong Kong Enhance the MPF System? Industry Players Speak

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

The MPF celebrated its tenth anniversary in 2010, but few in Hong Kong call it a perfect retirement system. Consultancy Towers Watson asked senior executives across fund houses for their MPF reform ideas — from contribution rates and tax breaks to MPF voluntary contributions. Here is what the market suggests.

Is the contribution rate too low?

Yes — the industry consensus is that 10% total is not enough. Schroders’ Kelvin Lee notes 5% each from employer and employee is low versus Asia-Pacific peers and deserves a review. Invesco’s Desmond Ng cites an HKIFA study: about 82% of respondents realised MPF alone cannot fund retirement, matching Towers Watson’s 2010 survey where 83% felt relevant income was insufficient. Singapore is the contrast: CPF rates of 15.5% (employer) and 20% (employee) let Singaporeans save far more for medical and retirement needs. BEA’s Patrick Li suggests raising the maximum relevant income, say from HK$20,000 to HK$30,000, so higher earners contribute more.

Would tax incentives help?

They are among the most effective ways to encourage voluntary contributions. Fidelity’s KP Luk wants the government to consider tax incentives for voluntary top-ups; AXA’s Benjamin Li puts tax concessions at the top of his wish list, citing the enormous US, UK and Australian experience. BEA’s Patrick Li agrees tax sweeteners would help close the gap left by mandatory contributions.

What about fund choice and withdrawals?

More choice, and more flexible payouts. RCM’s Elvin Yu calls the Employee Choice Arrangement the crucial step: members transferring their employee portion to a scheme of their choice at least yearly. AIA’s Bonnie Tse suggests relaxing investment restrictions — more emerging-market exposure — and raising the income ceiling. BEA’s Patrick Li and Hang Seng’s Wilson Tang both urge phased, annuity-like withdrawals instead of lump sums only. ING’s Wilsome Chow adds that raising ceilings must come with public education, since many members do not even know their portfolio allocations.

What else needs fixing?

Education, transparency and simpler processes. AXA pledges ongoing retirement-planning education across channels; China Life’s Thomas Tam wants regulators and providers to streamline operations and enrolment to cut charges. AMTD’s Alan Tsang sums it up: better education and transparency so members grasp what MPF means for their retirement.

To compare charges and returns across MPF funds, visit MPF fund comparison.